LIBRARY 

OF  THE 

UNIVERSITY  OF  CALIFORNIA. 

Class 


MANUAL  OF 

FIDELITY  INSURANCE 

AND 

CORPORATE  SURETYSHIP. 


Descriptive  of  Surety  and  Fidelity  Bonds  with  their 

practical  uses,  and  the  conditions  under  which 

they  should  be  written 

WITH 

HINTS  TO  AGENTS. 


By  HENRY  G.  PENNIMAN, 
Baltimore,  Md. 


PRICE,  $2.00 


1911. 
THE  SPECTATOR  COMPANY. 

CHICAGO  OFFICE,  185  WILLIAM  STREET. 

NATIONAL  LIFE  BUILDING.  NEW  YORK. 


COPYRIGHT,  1911, 

By  THE  SPECTATOR  COMPANY, 
NKW  YORK.  ' 


PREFACE. 


The  need  for  a  concise,  accurate,  and  at  the  same  time, 
simple  treatise  on  Fidelity  and  Surety  Bonds  has  frequently 
been  brought  to  the  attention  of  the  writer,  both  by  his  friends 
among  the  soliciting  fraternity  and  also  as  a  result  of  his 
own  experience  in  the  surety  business.  To  meet  this  lack  of 
accessible  information  this  manual  has  been  prepared.  In 
it,  as  far  as  possible,  legal  and  technical  phrases  have  been 
avoided,  the  effort  being  to  make  it  comprehensive  and  useful 
to  the  agent  and  solicitor  in  their  particular  fields. 

Most  of  the  literature  upon  the  subject  has  been  either  the 
work  of  lawyers  for  their  brothers  of  the  profession — the  mat- 
ter being  treated  from  a  purely  legal  point  of  view — or  the 
compilations  of  specialists,  whose  articles  have  been  con- 
structed on  a  purely  technical  foundation.  The  writer  has 
been  compelled  to  familiarize  himself  with  the  legal  and  tech- 
nical literature  on  the  subject,  which  is  widely  scattered,  and 
not  generally  accessible  to  the  agent  or  solicitor.  The  logical 
relation  between  this  information,  which  usually  treats  of 
matters  of  interest  to  the  general  office  or  its  legal  depart- 
ment, and  the  basic  principles  of  the  surety  business  is  not 
always  clear. 

Although  this  work  is  primarily  for  the  agent  and  solici- 
tor, the  basic  principles  on  which  the  business  is  founded  are 
explained;  while  the  manner  in  which  any  individual  proposi- 
tion must  be  regarded  by  the  home  office  is  so  discussed,  that 
it  is  hoped  the  business  man  may  overcome  any  uncertainty 
of  mind  in  regard  to  the  general  subject  existing  on  his  part 
by  reference  to  the  following  pages. 

The  surety  business  is  now  so  extensive  and  far  reaching 
that  there  is  scarcely  any  business  or  profession  with  which 

iii 


222665 


PEEFACE. 

it  does  not  come  into  contact,  and  on  which  its  influence  is 
not  felt.  This  book,  therefore,  should  be  of  interest  not  only 
to  the  agent  or  solicitor  whose  livelihood  may  depend  upon 
his  knowledge  of  suretyship,  but  also  to  many  others  who  use 
corporate  suretyship  to  a  sufficient  extent  to  be  interested  in 
its  principles  and  workings. 


INTRODUCTION. 


HISTORICAL. 

The  exact  origin  of  suretyship  is  unknown,  but  we  know 
that  it  is  of  ancient  practice  having  been  referred  to  in  the 
Old  Testament.*  Many  hundreds  of  years  later,  it  was  made 
the  basis  of  one  of  Shakespeare's  greatest  plays,  "  The  Mer- 
chant of  Venice." 

The  first  recorded  attempt  to  establish  a  society  having  for 
its  purpose  acts  at  all  akin  to  the  present  form  of  fidelity 
insurance  was  made  in  London  in  the  year  1720.  The  object 
of  this  society,  however,  extended  no  further  than  what  might 
be  termed  the  guarantee  of  hired  servants,  and  did  not 
embrace  the  numerous  uses  to  which  Fidelity  Bonds  are  now 
put. 

About  the  year  1840,  recognition  was  given  to  the  applica- 
tion of  the  laws  of  average,  which  govern  insurance,  to  the 
principles  of  fidelity  insurance,  and  several  years  later  the 
pioneer  fidelity  company  was  organized  in  England  by  a 
special  act  of  Parliament.  This  was  the  first  public  or  official 
recognition  of  the  usage  of  fidelity  insurance,  for  the  act 
granted  power  to  certain  government  officials  to  accept  the 
company's  bonds  or  policies  in  lieu  of  personal  surety  or 
securities  formerly  authorized  to  be  taken  by  law. 

The  first  legislative  recognition  of  this  business  in  the 
United  States  was  given  by  an  act  of  Legislature  of  the  State 
of  New  York  in  1853.  This  enactment  empowered  insurance 


*Genesis,  43 :  9 — I  will  be  surety  for  him ;  of  my  hand  shalt. 
thou  require  him ;  if  I  bring  him  not  unto  thee,  and  set  him 
before  thee,  then  let  me  bear  the  blame  forever. 

Proverbs,  11 :  15 — He  that  is  surety  for  a  stranger  shall  smart 
for  it :  and  he  that  hateth  suretyship  is  sure. 


FIDELITY   INSUEANCE  AND    COEPOBATE    SUBETYSHIP 

companies  organized  under  its  provisions  to  guarantee,  among 
other  things,  the  fidelity  of  persons  in  positions  of  public  and 
private  trust.  However,  it  was  not  until  the  year  1876  that 
a  company  was  organized  under  this  act,  and  not  until  1880 
did  it  commence  the  transaction  of  fidelity  insurance.  In 
June,  1881,  the  Legislature  of  New  York  extended  the  powers 
of  companies,  authorized  under  its  authority,  to  such  an  ex- 
tent that  the  guarantee  of  the  companies  could  be  taken  in 
lieu  of  the  usual  security  given  on  bonds  and  undertakings 
required  by  law,  while  judges  and  other  officials  were  author- 
ized to  approve  bonds  and  undertakings  when  so  guaranteed. 
Prior  to  this  time,  corporate  suretyship  was  limited  to  that 
class  of  bonds  which  are  now  known  as  straight  Fidelity  Bonds, 
or  those  which  guarantee  only  against  dishonesty.  Subse- 
quently, by  operation  of  the  laws  referred  to,  and  by  numerous 
others  enacted  since,  corporate  suretyship  has  branched  out 
until  it  now  covers  a  much  wider  scope  of  transaction  than 
any  other  form  of  insurance,  including  not  only  the  guaran- 
teeing of  honesty,  but  also  the  faithful  performance  of  duty, 
the  carrying  out  of  an  agreement  or  contract,  and  indemnity 
against  loss  in  a  great  number  and  variety  of  other  cases. 

By  the  growth  of  legislation  on  the  subject,  as  well  as  the 
change  in  custom,  the  practice  of  personal  guarantees  has 
been  almost  superseded  by  that  of  corporate  suretyship. 

This  widespread  use,  and  the  necessary  compilation  by  the 
companies  of  the  results  of  risks  which  they  have  taken,  has 
caused  the  greatest  caution  and  most  careful  scrutiny  to 
be  given  to  every  proposition.  Indeed,  this  is  necessary  for  the 
safety  of  companies  on  account  of  the  enormous  variety  of 
obligations  which  a  corporation  issuing  Surety  Bonds  is  called 
upon  to  assume.  One  of  the  chief  causes  of  this  exercise 
of  care  is  the  fact  that  the  transaction  of  this  line  of  busi- 
ness differs  from  other  insurance  lines  in  that  there  are  three 
instead  of  two  persons  involved: — the  surety,  the  assured,  and 
the  so-called  third  party  or  principal  from  whom  as  a  rule 
the  Fidelity  or  Surety  Bond  has  been  exacted.  The  fact  that 


FIDELITY  INSURANCE  AND   CORPORATE    SURETYSHIP 

the  bond  is  required  of  the  principal  rather  than  given  volun- 
tarily by  him  is  an  important  element  in  considering  the 
moral  hazard  of  the  risk,  and  it  is  due  chiefly  to  this  that 
much  that  affects  a  corporate  bond  may  remain  unknown  to, 
or  at  best  only  surmised  by  the  underwriter.  This  underlying 
principle  in  the  writing  of  Fidelity  and  Surety  Bonds  makes 
the  business  differ  greatly  from  other  lines  of  insurance,  and 
causes  considerable  confusion  among  field  men. 

ANALYSIS  OF  RISKS. 

A  simple,  but  necessary,  analysis  of  all  risks  may  be  out- 
lined as  follows: 

1 — Those  risks  which  are  underwritten  on  a  straight  insur- 
ance or  average  basis,  such  as  the  usual  Fidelity  Bond  or 
those  bonds  which  may  be  termed  honesty  risks. 

2— Those  risks  which  are  underwritten  on  a  credit  or  bank- 
ing basis  and  which  may  be  termed  pecuniary  risks. 

3 — Those,  in  which  both  of  the  above  principles  are  involved, 
and  which  guarantee  not  only  the  honesty  of  the  principal, 
but  also  that  he  will  faithfully  perform  his  duties  or  carry 
out  any  contract  or  agreement  under  which  he  is  working. 

Misconception  of  these  different  classes  of  risks  often  gives 
rise  to  the  erroneous  idea  which  exists  in  the  minds  of  a  large 
part  of  the  public  that,  inasmuch  as  corporate  suretyship 
is  classed  as  insurance,  it  can  be  and  is  written  on  the  gen- 
eral insurance  plan  of  an  average  basis;  whereas,  from  a 
consideration  of  the  above,  it  is  evident  that  only  a  portion 
of  it  can  be  written  in  this  manner.  /  A  further  treatment 
of  the  subject  will  be  given  in  subsequent  chapters,  which  will 
show  its  application  to  the  various  kinds  of  bonds. 

DIVISION  BY  STATE  INSURANCE  DEPARTMENTS. 

The  insuurance  departments  of  the  various  states  have 
divided  the  business  of  corporate  suretyship  into  the  two 
divisions;  i.  e.,  fidelity  and  surety.  Broadly  speaking,  the 

vii 


FIDELITY  INSURANCE  AND   CORPORATE   SURETYSHIP 

difference  between  them  is  as  follows:  a  Fidelity  Bond  is  a 
negative  guarantee,  and  its  intent  is  that  the  principal  will 
not  commit  certain  acts  under  certain  given  circumstances; 
whereas,  a  Surety  Bond  is  a  positive  guarantee,  and  under 
its  operation  the  principal  is  expected  to  perform  definite 
things  or  to  comply  with  certain  requirements. 

As  there  is  no  hard  or  fast  rule  describing  exactly  when 
risks  should  be  placed  in  one  or  the  other  of  the  two  divisions 
named  above,  and  as  underwriting  problems  present  many 
cases  in  which  the  guarantee  has  both  a  fidelity  and  surety 
aspect,  hardly  any  two  authorities  agree  upon  the  proper 
classification  of  risks,  and  probably  no  two  companies  are 
placing  exactly  the  same  kind  of  bonds  under  the  same 
divisions. 

In  this  book  the  different  kinds  of  business  will  not  be 
separated  into  the  two  general  divisions  of  fidelity  and  surety, 
in  accordance  with  the  author's  individual  ideas,  but  will  be 
divided  into  a  large  number  of  classes.  Such  classes,  in  turn, 
will  be  treated  separately,  in  order  to  avoid  any  confusion 
which  might  arise  were  the  author's  system  of  division  to 
differ  from  that  of  the  companies  whose  agents  may  have 
use  for  this  volume.  In  dividing  the  business  an  endeavor 
has  been  made  to  place  in  each  class  those  bonds  which  bear 
the  closest  resemblance  to  each  other,  and  which  the  under- 
writer approaches  from  the  same  general  point  of  view. 


viii 


TABLE    OF    CONTENTS    AND    CHAPTER 
SUMMARY. 

(References  are  to  pages.) 

PREFACE  .............................      iii-iv 

INTRODUCTION  .......................  v-viii 

HISTORICAL  ..............................  v_vii 

ANALYSIS  OF  RISKS  .......................  vy 

DIVISION  BY  STATE  INSURANCE  DEPART- 

MENTS .................................  vii-viii 


CHAPTER  I.     FIDELITY  BONDS   ...... 

DIVISION  OF  ..............................  9-10 

STANDARDS  APPLIED  TO  FIDELITY  RISKS  10-14 

1.  —  MORAL    STANDARD     ....................  10-13 

2.  —  PHYSICAL   STANDARD    ..................  13-14 

FIDELITY  APPLICATION   ..................  14-15 

EMPLOYERS'   STATEMENT    ................  15-16 

CLASSIFICATION  OF  FIDELITY  RISKS  .....  16-33 

1.  —  MERCANTILE    AND    MANUFACTURING  ......  17-22 

a  —  Inside  Employees    ................  18-19 

b  —  Outside  Employees    ...............  19-22 

2.  —  INSURANCE  .........................  22-24 

a  —  Regular  Lines    ...................  22-23 

b—  Industrial  ......................  23-24 

3.  —  BANKS,    TRUST    AND    FINANCIAL    INSTITU- 

TIONS ...............................  24-26 

4.  —  STOCK,      GRAIN      BROKERS      AND      PRIVATE 

BANKERS  .............................  26-27 

5.  RAILROADS,     STREET    RAILWAYS,    TRANSPOR- 
TATION AND  EXPRESS  CO.'S  ...............  27-28 

6.  -  TELEPHONE  AND  TELEGRAPH  COMPANIES  .  .  28 

7.  —  ELECTRIC     LIGHT,     HEAT,     POWER,     WATER 

AND    GAS    CO.'S  .  .  28 


TABLE  OF   CONTENTS    AND   CHAPTER   SUMMARY 

8. — FRATERNAL   ORDERS     28-29 

9. — LABOR   UNIONS     29-30 

10. — BUILDING   AND   LOAN   ASSOCIATIONS 30-31 

11. — CLUBS,  SOCIAL,  ETC 31 

12. — BUSINESS  AND  CHARITABLE  ASSOCIATIONS, 

ETC 31-32 

13. — AMUSEMENT    ENTERPRISES     32 

14. — MISCELLANEOUS   AND   MERCANTILE 32-33 

GENERAL  FORMS    33-34 

FURTHER  DIVISION  OF  FORMS  WITH  RE- 
SPECT TO  THE  GENERAL  GROUPS:  34-43 

1. — FORM  PROTECTING  AGAINST  DISHONESTY.  .  34-39 

2. — FORM  COVERING  MORE  THAN  DISHONESTY.  .  39-40 

3. — FORM  COVERING  EXCEPTIONAL  CONDITIONS.  41-43 

DIFFERENCES    IN    METHODS    OF    CARRY- 
ING OUT  THE  VARIOUS  CLAUSES 43 

BANK  BOND  FORMS 44-46 

DIFFERENCES   BETWEEN   THE  FORMS 44-46 

CHAPTER  II.     CONTRACT    CONSTRUC- 

TURAL  BONDS    47-66 

ADVISABILITY  OF  ACCEPTING  RISK 48-53 

CONSIDERATION    OF    SAME 49-53 

PREMIUM  RATE  AND  INDEMNITY  AGREEMENT .  .  54 

RATIO  OBSERVED  IN  EXECUTING  THESE  BONDS.  54-55 

BOND  FORMS 55-64 

ANALYSIS  OF  THE  GENERAL  PROVISIONS.  56-64 

A  SECOND  FORM  OF  BOND 62-64 

CANCELLATION  OR  RELEASE,  METHODS  OF  64-66 

CHAPTER  III.     MAINTENANCE 

BONDS 67-69 

WHEN  REQUIRED  67-68 

NECESSITY  FOR  INVESTIGATION 68-69 

CHAPTER  IV.     SUPPLY  BONDS 70-71 

2 


TABLE  OF   CONTENTS    AND   CHAPTER   SUMMARY 

CHAPTER  V.     MISCELLANEOUS     CON- 
TRACT BONDS 72-80 

CLASSIFICATION 72-80 

1. — PUBLIC  PRINTING    72-73 

2. — STREET    SPRINKLING     73 

3. — COTTON    COMPRESS,    ETC 73 

4. — FURNISHING  STEAM  PUMPS 73 

5. — CONSTRUCTION    OF    VESSELS 73-74 

6. — SURVEYING 74 

7. — PATENTS 74 

8. — GUARANTEEING   FRANCHISES,   ETC 75 

9. STREET  LIGHTING    75-76 

10. — FURNISHING    SCHOOL    BOOKS 76 

11. — REMOVAL  OF  GARBAGE 76 

12. — GUARANTEEING   WAREHOUSE   RECEIPTS  .  .  .  76-77 

13. — GUARANTEEING    FREIGHT    BILLS 77 

14. — GUARANTEEING  PAYMENT   OF   RENT 77-78 

15. — REPLACING  PROPERTY  AFTER  ALTERATION.  78 

16. — BONDS    AGAINST    LIENS 78-79 

17. — STAB    ROUTE     79-80 

CHAPTER  VI.     BID       OR       PROPOSAL 

BONDS 81-82 

WHEN  REQUIRED  81-82 

CHAPTER  VII.     JUDICIAL  BONDS  ....  83-95 

CLASSIFICATION 84-93 

1. — ADMINISTRATORS,   EXECUTORS,    ASSIGNEES, 

RECEIVERS,    ETC 84-89 

2. — GUARDIANS,   TRUSTEES,   ETC  . 89-92 

3. — COURT     PROCEEDINGS      (ATTACHMENT,     RE- 
PLEVIN,  ETC. )      92-93 

4. — BAIL  BONDS 93 

5. — LIBEL  BONDS    93 

BOND  FORMS    .  93 


TABLE  OF   CONTENTS    AND  CHAPTER  SUMMARY 

CANCELLATION  OR  RELEASE 93-95 

RENEWALS,  ETC 95 

CHAPTER      VIII.         MISCELLANEOUS 

INDEMNITY  BONDS  96-102 

KINDS  OF  96-101 

LOST  INSTRUMENTS  96-  99 

LIFE  INSURANCE  COMPANIES  AND  FRATERNAL 

ORDERS 99 

TITLES  TO  REAL  AND  PERSONAL  PROPERTY.  ...  100 
GUARANTEEING  PRODUCTION  OF  CERTAIN 

ARTICLES 100 

MISCELLANEOUS  JUDICIAL  CASES 101 

BOND  FORMS 102 

CHAPTER  IX.  BONDS  ON  BEHALF  OF 
STATE,  COUNTY  AND  MUNICI- 
PAL OFFICIALS  103-113 

CLASSIFICATION 104 

1. — OFFICIALS  NOT  HANDLING  MONEY 104 

2. — OFFICIALS    HANDLING    MONEY 104 

BONDS,    FROM    EMPLOYEES    SHOULD    BE 

REQUIRED 104-106 

SOME   HAZARDOUS    RISKS 106-108 

TERM  OF 108 

DIFFERENT  FROM  FIDELITY  BONDS 108-109 

APPLICATION     AND      INFORMATION     DE- 
SIRED      109-112 

INDEMNITY  AGREEMENT   112-113 

BOND  FORMS    113 

CHAPTER  X.  BONDS  GIVEN  TO  THE 
UNITED  STATES  GOVERNMENT 
ON  BEHALF  OF  ITS  OFFICIALS 

AND  EMPLOYEES   114-124 

INVESTIGATION  OF  APPLICANT  AND  BOND 

FORMS  .  .   115-116 


TABLE  OF   CONTENTS    AND   CHAPTER   SUMMARY 

CLASSIFICATION  OF   EMPLOYEES 116-124 

1. STATE  DEPARTMENT 116 

2. — TREASURY    DEPARTMENT     116-113 

3. WAR    DEPARTMENT     118-119 

4. — DEPARTMENT   OF   JUSTICE 119 

5. — POST    OFFICE    DEPARTMENT 120-121 

6. NAVY    DEPARTMENT     121-122 

7. — DEPARTMENT  OF  THE  INTERIOR 122-123 

8. — DEPARTMENT  OF  AGRICULTURE 123-124 

9. — DEPARTMENT  OF  COMMERCE  AND  LABOR.  .  .  124 

CHAPTER  XI.  INTERNAL  REVENUE 
AND  CUSTOMS  BONDS,  GIVEN  TO 
THE  UNITED  STATES  GOVERN- 
MENT   , 125-139 

THE  GUARANTEE    125-126 

CLASSIFICATION 126-138 

1. — INTERNAL  REVENUE 126-132 

2. — CUSTOMS  ,       132-133 

BOND  FORMS    138-139 

1. — INTERNAL   REVENUE    138 

2. — CUSTOMS 138-139 

SUGGESTION  IN  REGARD  TO  BUSINESS...  139 

CHAPTER  XII.  BONDS  GIVEN  FOR 
MUNICIPAL  OR  EXCISE  LI- 
CENSES IN  COMPLIANCE  WITH 

LOCAL  LAWS 140-147 

CLASSIFICATION 141-147 

1. — PAWN    BROKERS     141-142 

2. — EMPLOYMENT   AGENTS    142 

3. — AUCTIONEERS 142 

4, — NURSERYMEN 142 

5. — PLUMBERS 142 

6. — DRAIN    LAYERS     142-143 

7. — MOVING    BUILDINGS     .  143 


TABLE  OF   CONTENTS    AND   CHAPTER  SUMMARY 

8. — WAREHOUSE 143 

9. — EXPLOSIVES 143 

10. — ELECTRICIANS 144 

11. — STREET    OBSTRUCTIONS     144 

12. — DRAYMEN 144 

13. — SIGN  LICENSE    144 

14. — HOISTING 144 

15. — TICKET  BROKER 145 

16. OPENING  STREETS 145 

17. — STATIONARY   ENGINEERS     145 

18. BOILER 145 

19. THEATRE 145-146 

20. — SCALE 146 

21. — BASEMENT    STAIRWAY     146 

22. — FRANCHISE    (MISCELLANEOUS)    TO  PUBLIC 

BODIES 146 

23. BILL  BOARD    146 

24.— EXCISE 146-147 

CHAPTER  XIII.  BONDS  GUARANTEE- 
ING THE  SOLVENCY  OF  DEPOSI- 
TORIES    148-154 

CLASSIFICATION 149-153 

1. — PROMPT   PAYMENT   BOND 149-153 

2. — DEFERRED  PAYMENT  BONDS 153 

INFORMATION     REQUIRED     IN     WRITING 

THESE  BONDS    153-154 

APPENDIX 157-175 

JOINT  CONTROL  AND  CONVERTIBLE  COL- 
LATERAL    157-160 

COLLATERAL  REQUIRED  159-160 

IMPORTANCE   OF  ANSWERING  INQUIRIES 

FROM  THE  HOME  OFFICE 160-164 

CLASSIFICATION  OF  INQUIRIES 161-164 

1. CONCERNING   FIDELITY  OBLIGATIONS 161 

6 


TABLE  OF   CONTENTS    AND   CHAPTER  SUMMARY 

2. — CONCERNING  CONTRACT   OBLIGATIONS 161-163 

3. — CONCERNING    JUDICIAL    OBLIGATIONS 163 

4. — CONCERNING  PUBLIC  OFFICIAL  OBLIGATIONS  164 

5. CONCERNING    DEPOSITORY    OBLIGATIONS...  164 

AGENTS  OFFICE  ORGANIZATION 165-167 

FILING    SYSTEM    165-166 

INDEX    SYSTEM 166 

PROMPTNESS   IN    CORRESPONDENCE 166 

COLLECTION    OF    PREMIUMS 166-167 

ORGANIZATION    OF    TERRITORY 167 

THE  ART  OF  SOLICITING 167-169 

"  DONT'S  "  OR  FAMILIAR  HINTS  TO  AGENTS  170-175 

SPECIMEN  FORMS    176-232 

APPLICATIONS  USED  FOR  GENERAL  EM- 
PLOYEES, AGENTS,  ETC 176-179 

EMPLOYERS  STATEMENT  USED  ~FOR  GEN- 
ERAL EMPLOYEES,  AGENTS,  ETC 180 

EMPLOYERS  STATEMENT  FOR  BANK  EM- 
PLOYEES    181-182 

APPLICATION  FOR  SOCIETIES,  BENEFICIAL 
ORDERS,  ETC.,  FOR  SECRETARIES,  TREAS- 
URERS, ETC 182-185 

BOND  LESS   THAN   $1,000 182-183 

BOND   MORE    THAN    $1,000 183-185 

APPLICATION  FOR  MISCELLANEOUS  FI- 
DELITY CASES  185-187 

INDIVIDUAL  FIDELITY  BOND,  FOR  LAR- 
CENY OR  EMBEZZLEMENT  FOR  FIRMS 
AND  INDIVIDUALS  187-189 

GENERAL  SCHEDULE  BOND,  LARCENY  OR 

EMBEZZLEMENT 189-192 

FRATERNAL  ORDER  BOND  COVERING 

POSITION  .  .  192-194 


TABLE  OF   CONTENTS    AND   CHAPTER   SUMMARY 

INDIVIDUAL  FIDELITY  BANK  BOND 194-196 

BANK  FIDELITY  SCHEDULE  BOND 197-199 

AMERICAN         BANKERS         ASSOCIATION, 

STANDARD  BANK  FIDELITY  BOND 199-204 

APPLICATION  FOR  CONTRACT  BONDS 204-207 

FORM  NO.  I,  CONTRACT  CONSTRUCTURAL 

BOND 207-209 

FORM  NO.  2 209-210 

CONTRACTORS   INDEMNITY  BOND 211-213 

APPLICATION   USED   IN  JUDICIAL   CASES 

FOR  "  SHORT  TERM  "  TRUSTS 213-215 

APPLICATION   USED   IN   JUDICIAL   CASES 

FOR  "LONG   TERM"   TRUSTS 215-217 

APPLICATION  FORM  USED  IN  COURT  PRO- 
CEEDINGS    217-218 

APPLICATION  FOR  BONDS  OF  INDEMNITY.  218-220 
APPLICATION    FOR    COUNTY    AND    STATE 

OFFICIALS,  ETC 220-222 

APPLICATION  USED  FOR  UNITED  STATES 

OFFICIALS 222 

APPLICATION    FOR    UNITED    STATES    IN- 
TERNAL REVENUE  TOBACCO  AND  CIGAR 

MANUFACTURERS  BONDS.  . . 223-224 

APPLICATION    FOR    UNITED    STATES    IN- 
TERNAL    REVENUE,     DISTILLERS     AND 

WAREHOUSING   BONDS    224-225 

APPLICATION  FOR  MISCELLANEOUS  BONDS  225-226 
APPLICATION  FOR  DEPOSITORY  BONDS ...  227 

"  PROMPT  PAYMENT  "  DEPOSITORY  BONDS  228 

"  DEFERRED       PAYMENT "       DEPOSITORY 

BONDS 228-230 

GENERAL     INDEMNITY     BOND,     PROTECT- 
ING SURETY    230-232 

INDEX 233-268 

8 


MANUAL  OF 
FIDELITY  INSURANCE 

AND 

CORPORATE  SURETYSHIP 


CHAPTER  I. 

FIDELITY  BONDS. 

The  usual  Fidelity  Bond  is  to  protect  an  employer  from  loss 
occasioned  by  the  dishonesty  of  an  employee  (though  in  this 
chapter  bonds  which  are  a  little  broader  in  nature  will  also 
be  treated ) ,  and  is  required  by  banks,  trust  companies,  finan- 
cial institutions,  fraternal  orders,  clubs,  building  and  loan 
associations,  railroads,  street  railways,  mercantile  and  manu- 
facturing establishments,  insurance  companies  of  all  kinds,  etc. 

By  many  underwriters  this  branch  of  the  fidelity  and  surety 
business  is  considered  the  most  interesting,  as  there  are  so 
many  peculiar  and  varying  conditions  surrounding  each  class 
of  transaction  in  which  bonds  are  desired.  Rarely  are  there 
two  financial  or  mercantile  establishments  operating  on  ex- 
actly the  same  lines,  or  under  the  same  checking  system,  or 
where  the  moral  and  financial  personnel  of  the  employees  is 
identical.  These  bonds  are  always  very  desirable  for  both  the 
surety  company  and  agent,  or  solicitor,  to  obtain;  for  they 
can,  as  a  rule,  be  renewed  from  year  to  year  with  little 
trouble,  and  they  furthermore  constitute  a  source  of  income 
that  accumulates  very  rapidly. 

Fidelity  Bonds  are  so  diversified  and  cover  such  a  broad 
field  that  they  can  only  be  treated  along  very  general  lines. 
As  the  larger  portion  of  them  may  be  looked  upon  as  desir- 
able risks,  the  subject  will  here  be  discussed  rather  by  em- 
phasizing the  negative  viewpoints  and  calling  attention  to  the 
undesirable  features  than  by  commenting  at  length  upon  char- 
acteristics which  are  primarily  favorable. 

DIVISION  OF  FIDELITY  BONDS. 

Fidelity  Bonds  may  be  divided  into  three  general  groups: 
1 — Bonds  proper  which  protect  against  dishonesty  only. 

9 


FIDELITY  INSURANCE  AND  CORPORATE   SURETYSHIP 

2 — Bonds  which  embrace  more  than  dishonesty,  such  as  cul- 
pable negligence. 

3 — Bonds  which  embrace,  in  addition  to  the  above,  property 
responsibility,  and  other  contingencies  over  which  the  prin- 
cipal may  have  no  control;  such  as,  shortage  of  grain,  damage 
to  goods  in  custody,  etc. 

STANDARDS  APPLIED  TO   FIDELITY  RISKS. 

In  the  introductory  chapter,  reference  was  made  to  the 
separation  of  the  fidelity  and  surety  business  into  the  insur- 
ance, and  credit  or  banking,  features.  The  bonds  treated  in 
this  chapter  may  be  classed  as  the  straight  insurance  division 
of  the  business,  and  the  rate  of  premium  is  figured  on  a 
straight  percentage  of  losses  to  premiums.  As  in  other 
branches  of  insurance,  it  is  necessary  for  the  risk  to  come 
up  to  certain  fixed  standards. 

Briefly  speaking,  the  standards  to  be  applied  to  the  fidelity 
business  may  be  separated  into  two  groups,  moral  and 
physical. 

1 — MORAL    STANDARD. 

An  investigation  is  made  as  to  the  moral  standing  of  the 
applicant  by  obtaining  knowledge  of  his  associates,  his  mode 
of  living,  the  record  of  his  former  employment,  his  debts  and 
general  habits,  and  his  income  as  compared  with  his  condition 
in  life.  In  order  to  secure  definite  and  concrete  information 
upon  these  points,  it  is  necessary  for  the  surety  to  make  a 
confidential  investigation  of  the  applicant.  Experience  shows 
that  such  investigation  can  best  be  handled  from  the  home 
office,  as,  in  a  majority  of  cases,  the  persons  who  can 
give  the  desired  information  prefer,  for  many  reasons,  to  do 
so  direct  to  the  central  office,  in  order  to  be  sure  that  their 
statements  will  be  treated  in  absolute  confidence.  It  may 
be  well  to  state,  that  the  course  taken  by  surety  companies 
in  making  their  investigations  from  their  central  offices  is 
of  an  advantage  to  the  agent  or  solicitor,  as  it  avoids  the 

10 


FIDELITY   INSURANCE   AND    CORPORATE    SURETYSHIP. 

difficulty  of  his  being  placed  in  a  false  position  with  his  client 
when  an  application  is  declined.  The  agent  does  not  have 
to  know  anything  regarding  such  investigation.  There  is  also 
an  enormous  amount  of  detail  work  necessary  in  the  investi- 
gation of  fidelity  risks,  which,  if  conducted  by  an  agent,  would 
hamper  him  in  his  endeavors  to  secure  business.  Another 
point  to  be  considered,  in  this  connection,  is  the  inadvisability 
of  intrusting  to  the  mails  or  to  the  possession  of  unnecessary 
persons  adverse  reports  on  anyone.  The  law  defines  very 
broadly  what  constitutes  libel  and  every  care  should  be 
taken  to  prevent  even  remote  possibilities  of  any  liability 
of  this  nature,  which  might  not  only  prove  expensive  to  the 
agent  and  his  company,  but  would  very  likely  render  it  more 
difficult  for  either  one  or  the  other  to  secure  confidential  in- 
formation in  the  future. 

It  is  hardly  necessary  to  state  that  if  an  applicant's  asso- 
ciates are  of  either  a  low  or  extravagant  nature,  or  if  his 
mode  of  living  is  expensive,  and  his  income,  as  compared  to 
the  condition  under  which  he  is  obliged  to  live  in  view  of 
his  occupation,  is  insufficient,  or  if  he  has  debts  and  has  not 
made  proper  arrangements  for  liquidating  them,  or  if  his  gen- 
eral habits  are  not  correct,  then  the  application  is  declined.  It 
is  also  necessary  for  an  applicant  to  receive  a  good  record 
from  his  former  employers  covering  a  period  of  at  least  ten 
years,  if  possible.  These  are  generally  unbiased  and  in  posi: 
tion  to  give  a  very  fair  idea  as  to  the  applicant's  moral  stand- 
ing, his  mental  capabilities  and  likelihood  to  fill  properly  the 
position  for  which  the  bond  is  required.  There  are  numerous 
ways  in  which  surety  companies  secure  the  required  informa- 
tion, but  the  above  will  give  a  fair  idea  as  to  what  is  neces- 
sary for  an  applicant  to  meet  the  moral  investigation  for  this 
class  of  insurance. 

Morally,  applicants  for  Fidelity  Bonds  can  be  divided  into 
three  groups,  and  fidelity  risks  will  fall  into  one  of  the  fol- 
lowing : 

11 


FIDELITY   INSURANCE   AND   CORPORATE    SURETYSHIP 

a — Those,  who  occupy  positions  of  recognized  responsi- 
bility in  the  community,  in  business  or  professional 
circles. 

b — Those,  who,  while  not  publicly  or  generally  known,  fill 
regular,  though  minor  or  secondary,  positions  in  busi- 
ness or  professional  life. 

c — Those,  who  have  had  irregular  or  unsteady  occupa- 
tions, who  are  frequently  but  little  known,  even  to  their 
neighbors  and  co-workers,  and  who  fill,  as  a  rule,  the 
lowest  positions  in  the  commercial  world. 

The  above  groups  follow  closely  those  which  are  termed 
in  sociology  the  upper,  middle,  and  lower  classes  of  society, 
and  a  wide  field  for  consideration  is  presented  to  the  fidelity 
underwriter,  who  regards  the  sociological  aspects  of  his  busi- 
ness, and  who  weighs  the  needs,  the  temptations,  and  the 
opportunities,  or  the  lack  of  them,  in  the  station  of  life  from 
which  his  applicants  may  come.  For  instance,  innate  re- 
spect for  the  law,  the  certainty  of  loss  of  caste  and  the  dread 
of  disgrace  to  family  or  friends  have  operated  to  deter  from 
wrong  many  persons  of  the  first  or  second  groups;  whereas, 
among  those  classed  in  the  third  division  few  of  these  powerful 
incentives  to  honesty  may  exist.  Instead  of  having  respect  for 
the  law,  they  generally  look  upon  it  as  a  thing  only  to  be 
feared,  and  evaded  if  possible.  Where  pride  of  caste  does  not 
exist  it  cannot  be  lost.  In  a  new  neighborhood  or  among  new 
people  few  questions  are  asked:  to  those  who  are  familiar 
with  the  interior  of  police  courts,  disgrace  has  little  meaning. 
Therefore,  the  relation  of  an  applicant  to  the  many  incentives 
or  deterrents  to  honesty  peculiar  to  his  social  grade  should 
not  be  overlooked. 

Among  the  incentives  to  honesty,  one  of  the  strongest  is 
the  fact  that  a  man  is  married  and  is  situated  amidst  happy 
and  congenial  surroundings  and  leads  a  normal  life.  Such 
risks  are  less  liable  as  a  class  to  cause  trouble  to  their  surety 

12 


FIDELITY  INSUBANCE  AND  COEPOEATE   SUEETTSHIP 

than  single  men,  who  may  have  greater  opportunities  to  form 
bad  habits  and  to  acquire  undesirable  associates. 

Considerable  emphasis  also  should  be  laid  on  the  number 
of  persons  the  applicant  has  to  support  in  view  of  the  salary 
he  receives,  and  whether  such  persons  are  his  wife,  children,  or 
near  kin.  While  it  is  true  that  certain  responsibilities  and 
obligations  of  this  kind  operate  to  make  a  man  more  reliable, 
if  the  burden  placed  upon  him  is  too  great,  in  view  of  his 
salary  or  income,  these  responsibilities  may  become  a  tempta- 
tion to  dishonesty,  and  should  be  taken  into  consideration 
accordingly. 

The  relation  which  an  employee's  resources  bear  to  the  de- 
mands upon  him  cannot  be  made  too  important  in  the  con- 
sideration of  a  fidelity  risk. 

2 — PHYSICAL  STANDARD 

The  physical  side  of  a  risk  is  concerned  with  the  conditions 
under  which  the  applicant  is  to  handle  money,  and  with  the 
safe-guards  which  are  thrown  around  him  by  the  adoption 
of  up-to-date  bookkeeping  methods  with  a  thorough  check- 
ing system;  such  as,  counter- signature  of  checks,  frequent 
auditing,  and  similar  measures. 

It  may  be  well  to  call  attention  to  certain  facts  in  con- 
nection with  this  part  of  the  investigation,  namely:  that 
before  the  inception  of  surety  companies,  there  was  hardly 
any  system  of  accurate  accounting  in  force,  and  as  a 
result  millions  and  millions  of  dollars  were  embezzled  and 
never  discovered  by  the  employer.  Owing  to  the  fact,  how- 
ever, that  surety  companies  will  not  execute  Fidelity  Bonds 
unless  the  employer  adopts  all  possible,  proper  and  reasonable 
systems  of  accounting  in  the  conduct  of  his  business,  with 
regular  periodical  audits,  which  should  be  made  by  outside 
expert  accountants  whenever  possible,  and  at  least  once  a  year, 
the  introduction  of  corporate  suretyship  in  fidelity  risks  has 
had  a  very  marked  effect  as  a  moral  factor.  Surety  com- 

13 


FIDELITY  INSURANCE  AND  CORPORATE   SURETYSHIP 

panies  in  exacting  such  improved  accounting  systems  with 
stated  audits  are  not  imposing  any  burden  on  the  employer 
other  than  such  as  ordinary  attention  to  the  interests  of  his 
business  would  dictate.  Such  a  course  requires  from  the 
employee  nothing  but  strict  integrity  and  honesty. 

FIDELITY  APPLICATION. 

In  the  actual  handling  of  Fidelity  Bonds,  it  is  necessary, 
except  in  some  few  classes  of  risks,  that  the  applicant  should 
sign  what  is  known  as  a  Fidelity  Application.*  In  this  appli- 
cation the  various  surety  companies  have  arranged  questions, 
which  are  asked  for  the  specific  purpose  of  bringing  out  the 
essential  information,  or  the  source  from  which  such  data 
can  be  secured,  as  outlined  in  the  general  plan  of  investigat- 
ing fidelity  risks.  It  is  desirable  for  an  agent  or  solicitor, 
when  taking  such  an  application,  to  be  sure  that  the  applicant 
has  answered  in  full  each  and  every  question.  A  verification 
should  be  made  of  the  applicant's  statement  as  to  his  worth 
and  resources,  other  than  the  salary  received  from  his  em- 
ployer; and  a  clear  and  accurate  list  of  his  previous  places  of 
employment,  if  any,  should  be  given.  The  failure  to  receive 
replies  from  former  employers  or  discrepancies  in  dates,  as 
given  by  the  applicant,  cause  him  to  be  looked  upon  with 
suspicion,  and  when  taken  into  consideration  with  any  other 
unfavorable  point  in  the  investigation,  may  lead  to  the  de- 
clination of  the  risk  for  no  other  reason  than  the  carelessness 
of  the  applicant  in  not  giving  full  and  accurate  data.  Inquiry 
should  be  made  of  the  applicant,  under  the  Schedule  of  Debts, 
as  to  the  cause  of  such  debts  and  the  steps  which  have  been 
taken  for  their  liquidation.  There  should  be  no  objection 
on  the  part  of  the  applicant  to  giving  a  full  history  of  his 
life  and  surroundings,  as  the  confidential  use  of  such  informa- 
tion is  recognized  by  all  surety  companies  as  the  keynote 
to  their  successful  investigation  of  fidelity  risks.  In  this 


See  Appendix. 

14 


FIDELITY  INSURANCE   AND   CORPORATE    SURETYSHIP 

particular  it  may  be  pointed  out  that  the  relation  in  which 
the  company  stands  to  its  applicants  is  similar  to  that  of  a 
lawyer  and  his  client,  and  to  a  large  extent  the  well  recog- 
nized ethics  of  the  legal  profession  have  been  adopted  by 
surety  companies  for  guidance  in  their  relations  with  appli- 
cants. 

As  the  information  necessary  in  the  investigation  of  the 
various  classes  treated  in  this  chapter  differs  materially,  it 
is  the  practice  of  surety  companies  not  to  have  one  general 
form  of  application  to  be  taken  in  all  fidelity  cases.  While 
it  is  most  desirable  to  get  as  full  a  statement  from  an  appli- 
cant as  possible,  in  some  instances  shorter  or  more  condensed 
forms  are  permissible. 

Different  applications  ordinarily  are  used  for  the  following 
lines  of  business:* 

1 — Banks,  trust  companies  and  financial  institutions. 
2 — Fraternal  orders. 

3 — Mercantile,  manufacturing,  insurance  and  other  miscel- 
laneous business. 

4 — Railroads,  street  railways,  steamship  and  express  com- 
panies, when  such  institutions  have  an  application  for 
their  own  use,  the  investigation  on  which  is  open  to 
the  inspection  of  the  surety. 

EMPLOYER'S  STATEMENT. 

As  a  fidelity  bond  is  a  contract  with  an  employer  to  protect 
him  from  loss  under  certain  conditions,  it  is  necessary  for 
him  to  sign  what  is  known  as  an  Employer's  Statement,  which 
should  be  executed  either  by  the  employer  or  someone  duly 
authorized  to  do  so  on  his  behalf,  bearing  the  seal  of  the 
company,  if  the  employer  is  a  corporation,  or  if,  an  indi- 
vidual or  unincorporated  body,  a  properly  witnessed  and  dated 
signature.  Too  much  emphasis  cannot  be  laid  on  the  im- 
portance of  the  fact  that  the  Employer's  Statement  is  made 

*  See  Appendix,  pages  176-187. 
15 


FIDELITY  INSURANCE  AND  CORPORATE   SURETYSHIP 

a  warranty  under  the  bond,  and  must,  therefore,  be  received 
by  the  surety  before  the  bond  can  properly  be  issued. 

It  is  of  absolute  necessity  in  filling  out  such  statements 
that  the  duties  of  the  applicant  should  be  fully  explained, 
and  that  his  authority  and  latitude  in  handling  money  should 
be  plainly  stated.  At  the  time  of  taking  such  statement, 
it  would  be  well  for  the  agent  or  solicitor  to  see  if  pos- 
sible, that  every  arrangement  is  made  for  an  adequate 
checking  of  the  applicant's  expenditures  and  also  that  there 
are  frequent  and  regular  examinations  of  his  accounts.  It  is 
desirable,  in  fact  nearly  always  imperative,  that  such  an  ex- 
amination should  be  made  immediately  before  the  date  of  the 
bond  in  order  to  prevent  the  bond  from  becoming  retroactive 
to  the  detriment  of  the  surety. 

For  the  convenience  of  stating  plainly  and  in  detail  the  con- 
ditions under  which  the  various  employees  are  operating, 
separate  forms  of  Employer's  Statements  are  commonly  used 
for  the  following  general  lines  of  business:* 

1 — Banks,  trust  companies,  and  financial  institutions. 

2 — Fraternal   orders. 

3 — Mercantile,    insurance    and    miscellaneous    classes    of 

business. 
4 — Railroads,  railways,  steamship  and  express  companies. 

In  large  lines  of  business  where  there  are  various  positions 
covered  and  the  duties  of  a  number  of  employees  are  identical, 
one  general  statement  covering  each  separate  division  or  class 
of  employees  is  frequently  used. 

CLASSIFICATION  OF  FIDELITY  RISKS. 

In  order  to  give  an  idea  as  to  the  varying  conditions  with 
which  the  various  classes  of  business  treated  under  this  chap- 
ter should  be  considered  from  an  underwriting  standpoint,  it 
is  deemed  expedient  to  divide  fidelity  risks  as  follows: 


*  See  Appendix,  pages  180-185. 
16 


FIDELITY  INSURANCE  AND  CORPORATE   SURETYSHIP 


Mercantile 


1—        and 


Manufacturing. 


2 — Insurance. 


-Inside 
employees. 


b — Outside 
employees. 


Officers. 
Managers. 
Bookkeepers. 
Cashiers. 
Clerks. 
I  Salesmen. 

^Traveling  salesmen. 

Collectors. 
J  Agents  on  salary. 

Agents  on  commission. 
[Drivers. 


'a — Regular 

lines. 
b — Industrial 

Insurance. 


fOfficials,  clerks,  etc. 
General  agents. 
Special  agents. 
Local  and  Sub-agents. 


3 — Banks,  trust,  and  financial  institutions. 

4 — Stock,  grain  brokers,  and  private  bankers. 

5 — Railroads,  street  railways,  transportation,  and  express 
companies. 

6 — Telephone  and  telegraph  companies. 

7 — Electric  light,  heat,  power,  water,  and  gas  companies. 

8 — Fraternal  orders. 

9 — Labor  unions. 

10 — Building  and  loan  associations. 
11— Clubs    (social,  etc.). 

12 — Business   and   charitable   associations,  etc. 
13 — Amusement  enterprises. 
14 — Miscellaneous  mercantile  lines  of  business. 

1 — MERCANTILE  AND  MANUFACTURING 

Fidelity  risks  on  behalf  of  mercantile  and  manufacturing 
establishments  can,  for  the  purpose  of  explanation,  be  treated 
under  two  classes — inside  and  outside  employees. 

17 


FIDELITY  INSURANCE  AND  COBPORATE   SURETYSHIP 

The  term  "  inside  employee  "  is  applied  to  those  employees 
who  are  stationed  at  the  main  house,  or  those  in  a  branch 
house  who  are  under  the  direct  supervision  of  a  superior 
located  at  such  branch.  The  term  "outside  employee"  is 
used  when  the  employee  is  working  outside  of  the  house,  either 
on  the  road,  or  the  street,  or  in  charge  of  a  branch  house  or 
office.  The  former  are  regarded  as  less  hazardous  than  the 
latter,  as  a  much  closer  check  can  be  placed  on  an  inside 
employee,  even  when  the  formal  surveillance  is  less  rigid,  as 
he  is  under  the  constant  observation  of  his  superiors.  This 
has  a  good  moral  effect. 

a — Inside  Employees. 

Officers  and  Managers. — The  most  desirable  business  under 
this  heading  consists  of  the  bonds  of  officers  of  corporations 
where  there  is  a  satisfactory  checking  system,  particularly 
when  such  men  do  not  hold  dual  positions;  such,  as  secretary 
and  treasurer,  or  president  and  treasurer.  The  check  should 
consist  of  very  limited  individual  powers  in  the  expenditure 
of  money,  and  regular  and  frequent  examination  of  accounts. 
The  moral  standing  of  these  employees  is  usually  very  good, 
and  the  applicants  frequently  own  property. 

The  business  of  inside  managers  can  be  classed  with  officers 
of  corporations,  but  care  should  be  taken  to  see  that  the 
authority  given  such  men  is  not  too  great.  By  "  inside  man- 
agers "  is  not  meant  managers  of  branch  houses  whose  loca- 
tion is  away  from  the  main  office.  These  are  classed  as  out- 
side employees,  although  those  under  them  are  usually  grouped 
as  inside  employees. 

Bookkeepers,  Cashiers  and  Office  Clerks. — The  most  impor- 
tant considerations  attendant  upon  these  applicants  are  to  see 
that  there  is  a  frequent  and  adequate  checking  system  in 
use,  and  that  the  surety  gets  full  and  detailed  information 
as  to  the  former  record  of  employees.  This  record  is  par- 
ticularly desirable  in  these  cases,  as  the  applicant  for  a  bond 
of  this  kind  is  not  usually  an  owner  of  property.  If,  how- 

18 


FIDELITY  INSURANCE  AND  CORPOBATE   SURETYSHIP 

ever,  he  has  a  thoroughly  good  record  in  former  positions, 
and  has  never  been  guilty  of  dishonorable  or  careless  con- 
duct, he  should  be  a  desirable  risk.  The  former  employers 
of  such  applicants  are  likely  to  give  a  perfectly  frank  and 
honest  report.  This  cannot  always  be  obtained  from  the  ref- 
erences named,  as  these  are  usually  personal  friends. 

Clerks  and  Salesmen. — These  employees,  when  coming  under 
the  classification  of  "  inside  employees  "  and  when  good  busi- 
ness methods  are  in  effect,  may  be  considered  in  the  same 
light  as  bookkeepers,  cashiers,  and  office  clerks.  Business 
under  this  heading  is  usually  found  in  large  concerns,  and  it 
includes  department  heads  in  wholesale  and  retail  establish- 
ments, together  with  receiving  and  shipping  clerks,  office  or 
storehouse  boys,  passenger  elevator  employees,  watchmen, 
porters,  janitors,  etc. 

Certain  lines,  however,  must  be  looked  upon  with  disfavor, 
as  the  experience  of  surety  companies  has  proven  them  to 
be  very  dangerous.  The  hazardous  linea  include  among  others, 
packing  houses,  jewelery  houses,  loan  and  chattel  mortgage 
companies,  as  well  as  certain  clothing  houses  having  branch 

stores. 

b — Outside  Employees. 

Traveling  Salesmen. — These  employees  are  the  most  fre- 
quent examples  of  this  class,  and  great  care  should  be  exer- 
cised in  underwriting  such  risks.  The  class  contains  more  pro- 
hibited lines  than  any  other,  especially  when  the  salesman  is 
authorized  to  collect.  This  arises  from  the  fact  that  these 
employees  are  beyond  close  supervision,  and  in  a  large  meas- 
ure in  a  position  to  become  suddenly  short  of  funds  with 
little  chance  of  securing  the  same  [being  away  from  home  and 
friends] :  the  result  of  this  is  that  their  own  funds  are  often 
intermingled  with  those  of  their  employer. 

Traveling  salesmen  for  liquor  houses,  jewelry  or  install- 
ment firms  of  any  kind,  publishing  houses,  picture  and  por- 
trait concerns,  cigar  manufacturers,  breweries,  wringer  or 
sewing  machine  companies,  salesmen  who  canvass  the  country 

19 


FIDELITY  INSUBANCE  AND  COBPOBATE   SUBETYSHIP 

or  small  towns  with  a  team  carrying  samples  or  a  stock  of 
goods,  salesmen  for  drug  and  medicine  houses,  and  those 
handling  tea,  coffee  and  spices  are  looked  upon  with  more 
or  less  disfavor.  Traveling  salesmen  in  any  line,  who  are 
paid  on  a  commission  basis,  should  only  be  written  in  rare 
instances,  as  when  they  are  property  owners.  When  they  are 
paid  a  straight  salary  and  the  line  of  trade  is  approved,  they 
may  be  acceptable  risks. 

When  traveling  expenses  are  paid  by  the  employer,  it  is  a 
point  in  favor  of  the  advisability  of  accepting  the  risk,  and 
this  practice  renders  more  desirable  liquor,  brewery  and  cigar 
salesmen  when  paid  a  sufficiently  large  salary  and  expenses, 
but  only  when  a  high  rate  of  premium  can  be  secured.  Sales- 
men who  are  authorized  to  collect  should  only  be  considered 
when  collections  are  remitted  promptly  and  frequently  to  the 
employer,  and  statements  from  the  employer  are  sent  out  at 
short  intervals  direct  to  the  customers.  Fidelity  Bonds,  as 
a  rule,  are  not  intended  to  cover  samples  carried  by  traveling 
salesmen,  and  when  such  is  the  idea  of  the  employer,  a  definite 
understanding  should  be  reached  as  to  this  feature. 

Collectors. — These  employees  must  be  scrutinized  most  care- 
fully. The  less  desirable  lines  are  surrounded  with  about 
the  same  elements  of  risk  as  under  the  caption  "Traveling 
Salesmen,"  and  for  the  same  reasons.  For  the  business  to 
be  acceptable,  the  applicant  should  be  paid  a  straight  salary 
and  turn  over  collections  daily,  or  at  short  intervals,  and 
statements  should  be  mailed  by  the  employer  to  his  cus- 
tomers with  reasonable  frequency.  Collectors  for  installment 
houses  are  considered  especially  hazardous,  chiefly  on  account 
of  the  class  and  standing  of  the  employees. 

Agents  on  Salary. — The  most  desirable  of  these  risks  are 
those  persons  permanently  located  and  handling  a  staple  or 
regular  commodity  of  merchandise,  with  proper  and  frequent 
intervals  of  remitting,  checking,  and  auditing  accounts.  There 
is  frequently  great  hazard  in  bonding  those  agents  who  are 
responsible  for  consignments;  such  as,  manufacturers'  agents, 

20 


FIDELITY  INSUBANCE  AND  CORPORATE   SUBETYSHIP 

who  receive  goods  where  the  payment  for  same  is  guaranteed 
by  the  surety.  In  these  cases  there  is  usually  a  special 
contract  between  the  employer  and  the  agent,  which  agree- 
ment should  be  scrutinized  carefully  to  ascertain  the  true 
liability  thereunder. 

Agents  on  Commission. — This  business  is  practically  pro- 
hibited^ for  the  reason  that  experience  has  shown  that  the 
human  race  as  a  class  is  sanguine,  and  that  a  man  selling 
on  commission  is  apt  to  expect  that  this  commission  will  be 
larger  than  it  finally  is  on  the  day  of  settlement.  He 
gauges  his  mode  of  living  beyond  his  means,  with  the  result 
that  he  is  often  short  in  his  accounts  without  dishonest  in- 
tention. These  risks,  therefore,  must  be  examined  carefully 
to  see  that  a  proper  checking  system  is  in  vogue  to  prevent 
such  employees  from  getting  behind  in  their  remittances, 
and  also  to  enable  them  to  know  exactly  what  they  are  mak- 
ing. If  an  agent  working  on  commission  is  a  man  of  outside 
means,  or,  has  a  fixed  income  apart  from  his  commissions,  the 
risk  may  be  looked  upon  favorably,  if  in  an  approved  line 
of  business. 

Drivers. — The  danger  of  writing  bonds  of  this  class  is  very 
great.  A  slight  distinction  can  be  made,  however,  between 
drivers  who  handle  money  and  those  who  do  not.  Drivers 
of  laundry  and  supply  houses  are  practically  prohibited.  By 
supply  houses  are  meant  towel  or  linen  supply  concerns  or 
any  line,  where  the  article  supplied  remains  the  property  of 
the  employer,  and  loss  or  destruction  of  same  may  by  any 
possibility  be  charged  to  the  driver.  Drivers  for  ice,  bakery 
and  confectionery  concerns  are  somewhat  less  hazardous. 
Other  delivery  drivers;  such  as,  employees  of  delivery  contrac- 
tors, drivers  and  bundle  boys  employed  by  department  and 
large  retail  stores,  and  drivers  for  express  companies,  are  gen- 
erally considered  in  connection  with  the  entire  working  force 
of  such  companies. 

The  premium  rate  on  drivers  is  always  high,  and  the  busi- 
ness is  not  generally  desired,  on  account  of  the  moral  hazard, 

21 


FIDELITY  INSURANCE  AND  COBPOBATE   SUBETYSHIP 

as  a  rule,  not  being  good  and  the  extreme  difficulty  experi- 
enced in  obtaining  a  complete  record  of  the  men  of  the  class 
usually  holding  these  positions.  Generally,  drivers  have  no 
previous  record  on  which  the  surety  can  base  any  experience, 
and  it  has  been  found  next  to  impossible  to  adopt  a  checking 
system  which  will  prevent  small  defalcations. 

2 — INSURANCE, 
a — Regular  Lines. 

The  general  statements,  as  previously  outlined  in  dividing 
mercantile  and  manufacturing  risks  into  inside  and  outside 
employees,  can  be  referred  to  in  this  division. 

Officials  and  all  clerks  employed  in  main  offices,  or  in  agents' 
offices  and  bonded  to  the  agents,  may  be  considered  as  inside 
employees,  and  the  general  treatment  of  these  positions  under 
the  head  of  "  Mercantile  and  Manufacturing  "  risks  will  apply 
here. 

Outside  employees  can  be  enumerated  and  divided  as  fol- 
lows: general  agents,  special  agents,  and  local  or  sub-agents. 

For  purposes  of  distinction,  it  may  be  stated  that  a  gen- 
eral agent  is  one  who  reports  direct  to  his  home  office  with- 
out the  supervision  or  direction  of  any  intermediary.  District, 
local  or  sub-agents  are  those  reporting  through  a  general 
agency.  They  are  usually  under  the  direction  of  the  gen- 
eral agent.  Special  agents  are  those  employed  by  the  home 
office  or  by  general  agents  for  the  purpose  of  exercising  field 
supervision  over  the  respective  agency  plants. 

General  Agents. — General  agents  are  desirable  risks  if  they 
be  men  of  established  reputation  in  the  insurance  business, 
especially  if  they  have  means  and  receive  a  salary,  or  have 
an  assured  income  from  their  business  by  reason  of  renewals, 
or  if  the  bond  required  by  them  does  not  guarantee  that  they 
are  responsible  for  uncollected  premiums.  The  general  policy 
of  surety  companies  is  not  to  execute  bonds  of  employees 
under  this  class  except  after  a  most  thorough  investigation. 

22 


FIDELITY   INSURANCE   AND   CORPORATE    SURETYSHIP 

The  moral,  financial  and  business  standing  of  the  applicant 
must  be  beyond  reproach. 

Special  Agents. — Special  agents,  whose  duties  are  limited 
to  the  inspection  of  risks  or  partake  of  the  nature  of  those 
of  traveling  auditors,  are  usually  acceptable  risks.  When 
the  term  "  special  agent "  means  one  collecting  money,  the 
bonds  are  not  as  desirable,  although  this  depends  upon  the 
conditions  under  which  such  agents  are  employed.  The  term 
"  special  agent "  is  applied,  however,  to  men  performing  such 
a  great  variety  of  duties,  that  they  must  be  considered  from 
the  standpoint  of  their  duties  rather  than  that  of  title.  The 
designation  is  ordinarily  applied  to  those  indicated  in  the  be- 
ginning of  this  paragraph,  and  where  such  is  the  case  the 
same  general  conditions  surrounding  mercantile  employees 
apply. 

Local  and  Sub-Agents. — This  business  is  rarely  desired,  par- 
ticularly if  the  principal  under  the  bond  reports  through  an- 
other agent,  and  if  the  bond  has  to  be  written  in  favor  of 
the  insurance  company.  When  these  risks  are  taken,  it  is 
usually  in  connection  with  the  entire  agency  force  of  the  par- 
ticular company;  the  business  in  which  instances  must  be 
considered  as  part  of  the  entire  line  and  special  arrange- 
ments made  concerning  the  same. 

b — Industrial  Insurance. 

This  line  is  regarded  by  surety  companies  generally  as  one 
which  must  be  approached  very  carefully.  The  checking  sys- 
tems in  use,  the  principles  of  operation  and  the  class  of 
employees  are  the  three  factors  which  do  most  toward  making 
the  line  an  expensive,  if  not  frequently  an  unprofitable  one  to 
the  surety.  It  is  almost  impossible  to  prevent  numberless 
small  defalcations.  Other  shortages  are  constantly  occasioned 
through  lapses  on  policies  and  failure  to  collect  premiums, 
although  this  may  constitute  no  actual  dishonesty  on  the 
part  of  the  agent.  As  these  two  causes  result  in  considerable 
loss  to  the  industrial  insurance  companies,  it  is  their  prac- 

23 


FIDELITY   INSUBANCE   AND   COBPOBATE    SUBETi'SHIP 

tice  to  require  a  bond  which  will  cover  them.  In  a  great 
many  cases  the  surety  is  obliged  to  pay  for  premiums  which 
the  agent  credited  to  the  policyholder  but  did  not  collect, 
and  as  this  is  an  infraction  of  rules,  rather  than  an  act  within 
reach  of  the  law,  it  is  almost  impossible  to  prosecute  in  such 
cases.  However,  when  an  industrial  company  uses  a  thor- 
oughly effective  checking  system,  and  will  accept  a  restricted 
form  of  bond  covering  no  more  than  larceny  or  embezzlement, 
the  business  may  frequently  be  written  at  a  profit,  although 
the  premium  rate  must  necessarily  be  high. 

3 — BANKS,    TBUST,    AND    FINANCIAL    INSTITUTIONS. 

No  class  of  fidelity  business  has  been  more  sought  after. 
Most  banks  are  required  by  banking  regulations  to  bond  their 
employees,  and  where  such  is  the  case  the  Fidelity  Bond  is 
a  necessity  rather  than  merely  a  reasonable  business  precau- 
tion, as  in  many  other  instances.  Where  bonds  are  necessary 
their  solicitation  is  infinitely  easier.  .The  moral  standing  of 
men  connected  with  banks  is  sufficiently  high  to  make  them 
desirable  as  risks.  They  are  usually  owners  of  property, 
especially  the  officers,  and  the  salaries  generally  paid  are  large 
enough  to  enable  them  to  live  comfortably  and  to  save,  if 
they  be  so  inclined.  The  bookkeeping  systems,  although  they 
vary  materially,  are  as  a  rule  better  than  in  mercantile  estab- 
lishments, and  generally  provide  for  an  adequate  check  upon 
the  employee  by  means  of  a  counter  check  by  some  other  em- 
ployee, together  with  frequent  examinations  and  verification 
of  funds  or  accounts. 

Where  a  bank  or  trust  company  is  well  managed,  it  is  an 
excellent  risk;  but  when  any  of  the  above  points  are  found 
lacking,  it  must  of  necessity  be  looked  upon  as  hazardous. 
This  is  on  account  of  the  large  amount  of  money  involved, 
for  bank  losses,  when  sustained,  are  usually  large.  To  offset 
this,  however,  the  salvage  obtained  on  these  losses  is  also 
large  when  compared  with  other  lines  of  fidelity  risks,  and 

24 


FIDELITY  INSURANCE  AND  CORPORATE    SURETYSHIP     . 

this  fact  is  reflected  in  the   rate  quoted  upon  this  class  of 
business. 

The  chief  points  to  be  considered  in  these  risks  are: — 

a — The  applicant's  social  and  moral  standing. 

b — His   freedom  from  all  vices. 

c — The  property  holdings  of  himself  or  his  family. 

d — The  salary  received  (whether  it  be  adequate  to  main- 
tain him  in  the  position  which  he  holds  in  the  com- 
munity ) . 

e — The  efficiency  of  the  checking  system  in  use,  and  the 
frequency  of  examinations  and  audits. 

The  first  four  points  set  forth  above  may  be  regarded  in 
the  same  light  as  they  would  be  were  the  risk  purely  mer- 
cantile, with  due  regard  for  such  special  social  and  financial 
demands  as  may  be  made  upon  a  bank  employee. 

The  fifth  point  presents  a  situation  somewhat  different  from 
the  other  lines,  and  is  of  the  utmost  importance  both  to  the 
surety  company  and  the  bank.  There  is  a  growing  tendency 
on  the  part  of  the  banks  not  to  rely  upon  and  accept  as 
sufficient  reports  or  examinations  of  public  bank  examiners, 
and  up-to-date  banks  are  adopting  systems  of  thorough  audit 
by  outside  expert  accountants  at  reasonably  frequent  inter- 
vals. Without  reflection  upon  the  average  public  bank  ex- 
aminer, it  is  obviously  a  physical  impossibility  in  most 
instances  for  them  to  make  thorough  examinations  of  the 
large  number  of  banks  under  their  supervision.  Surety  com- 
panies, therefore,  regard  with  favor  an  institution  which 
regularly  engages  the  services  of  a  public  accountant,  though 
there  may  also  be  an  examination  made  by  a  special  com- 
mittee of  directors.  In  this  connection,  it  should  be  noted 
that  experience  has  shown  the  chief  cause  of  defalcation  on 
the  part  of  bank  employees  to  be  speculation;  therefore,  when 
an  unexpected  and  thorough  audit  is  likely  to  be  made  at 
any  time,  it  has  a  marked  effect  in  checking  this  practice. 

25 


FIDELITY  INSUEANCE  AND  CORPORATE   SURETYSHIP 

The  size  and  location  of  a  bank  plays  an  important  part 
in  the  determination  of  the  advisability  of  accepting  the 
risk.  Thus,  a  large  city  bank  having  a  large  enough  number 
of  employees  to  provide  a  counter-check  at  every  point,  and 
doing  a  sufficiently  large  business  to  afford  to  adopt  every 
physical  precaution  against  loss,  is  necessarily  looked  upon 
with  more  favor  than  the  small  institution,  which  is  run 
usually  by  not  more  than  three  or  four  men,  and  frequently 
by  one  only.  Surety  companies  generally  avoid  the  "  one 
man"  institution,  on  account  of  the  employee's  latitude  in 
all  the  bank's  affairs.  The  only  advantage  which  such  busi- 
ness presents  is  due  to  the  normal  manner  of  living  in  small 
towns  and  also  to  the  fact  that  the  employee  of  such  a  bank 
is  not  usually  surrounded  by  the  opportunities  for  specu- 
lation and  extravagance  that  affect  the  employee  of  a  city 
bank.  Experience,  however,  has  shown  that  this  factor  does 
not  play  so  important  a  part  as  it  might  seem  to  do  at  first 
consideration,  for  by  means  of  injudicious  or  unauthorized 
loans  to  close  friends  or  neighbors,  with  whom  frequently 
country  bank  employees  have  other  business  interests,  the 
loss  ratio  is  higher  than  in  those  banks  where  the  individual 
powers  are  limited. 

The  employees  of  private  banks  will  be  treated  under  the 
head  of  stock  brokers,  etc.,  as  the  conditions  surrounding  the 
latter  class  apply  more  particularly  to  private  banks. 

4 — STOCK,    GRAIN    BROKERS    AND    PRIVATE    BANKERS. 

Bonds  of  employees  engaged  in  the  above  lines  of  business 
are  uniformly  looked  upon  with  disfavor,  except  in  instances 
where  the  employer  is  well  known  and  of  long  standing. 
When  the  business  is  along  the  line  known  as  "  bucket  shops," 
or  is  operated  solely  on  marginal  speculation,  the  bonds 
are  rarely  written  by  a  surety  company,  if  it  be  aware  of 
these  facts.  It  is  true,  however,  that  in  some  cases  where 
the  deposit  feature  is  pre-eminent,  and  the  stock  or  bond  busi- 
ness is  for  the  purpose  of  investment  rather  than  speculation, 

26 


FIDELITY  INSURANCE  AND  CORPORATE   SURETYSHIP 

the  business  increases  in  desirability  in  accordance  with  the 
recognized  standing  of  the  house.  The  rules  and  regulations  of 
the  particular  exchange  under  which  the  firm  operates  should 
be  considered  in  connection  with  the  risk.  The  undesirability 
of  most  of  this  business  rests  in  the  fact  that,  although  the 
moral  standard  of  employees  in  the  better  class  of  these  con- 
cerns is  equal  to  that  of  those  of  national  or  state  banks, 
the  presence  of  a  "  ticker  "  in  the  office  causes  a  temptation 
to  speculate,  while  the  less  rigid  checking  systems  generally 
in  use  give  the  employees  every  chance  and  afford  the  great- 
est incentive  "  to  play  the  market."  Such  practice  has 
usually  one  result,  the  use  of  another  person's  money.  The 
rate  on  these  lines,  when  they  are  written  at  all,  must, 
therefore,  be  higher  than  on  the  ordinary  bank  clerk. 

5 — RAILROADS,     STREET     RAILWAYS,     TRANSPORTATION     AND     EX- 
PRESS  COMPANIES. 

Business  of  this  character  is  rarely  offered  on  individual 
risks,  but  the  entire  force  of  a  company  or  system  is  usually 
written  at  one  time  and  on  a  form  known  as  a  Schedule 
Bond.  Where  this  is  the  case,  and  an  employer  is  paying  a 
large  sum  in  premiums  to  a  surety  company,  it  is  only  natural 
that  he  should  give  closer  attention  to  and  make  a  greater 
study  of  the  protection  for  which  he  is  paying  than  does  the 
employer  with  but  two  or  three  risks. 

It  will  be  found,  therefore,  that  where  this  business  is 
concerned,  the  assured  will  in  many  instances  submit  for 
execution  a  form  of  bond  prepared  by  his  own  attorneys, 
or  legal  department,  and  will  ask  for  certain  methods  to  be 
pursued  in  handling  his  line.  It  has  been  the  practice  of 
surety  companies  in  the  past  to  meet  these  special  conditions, 
and  it  is,  therefore,  very  difficult  to  make  general  statements 
on  the  subject  of  this  business.  It  may  be  stated,  however, 
that  where  the  volume  of  business  is  great  and  the  premiums 
large,  the  employer  will  desire  special  forms  put  into  print 
for  his  particular  use,  and,  therefore,  the  method  of  handling 

27 


FIDELITY  INSUEANCE   AND   COEPOBATE    SUBETYSHIP 

the  business,  of  assuming  and  cancelling  risks,  of  paying 
premiums  and  computing  the  return  premiums,  of  filing  and 
adjusting  claims,  and  in  fact  all  of  the  many  details,  should 
be  arranged  and  clearly  understood  before  the  line  is  taken  on. 

6 — TELEPHONE   AND   TELEGBAPH  COMPANIES. 

Practically  all  that  is  true  regarding  special  conditions  in 
the  writing  of  the  bonds  of  railroads,  street  railways,  etc., 
is  true  of  the  business  of  telephone  and  telegraph  companies, 
and  especially  so  of  the  latter.  There  are,  however,  a  number 
of  small  telephone  companies  operating  chiefly  in  the  country 
districts,  and  where  these  are  concerned,  their  operations 
should  be  looked  into  most  carefully.  Many  of  them  are 
conducted  along  co-operative  lines,  and  when  such  is  the  case, 
the  chief  item  for  consideration  is  the  method  and  frequency 
of  checking  those  employees  who  handle  money. 

7 — ELECTBIC  LIGHT,   HEAT,  POWEB,   WATEB  AND  GAS  COMPANIES. 

Bonds  written  in  favor  of  any  of  these  companies  are 
likely  to  be  in  large  lines,  and  it  frequently  happens  that 
several  or  all  of  the  various  commodities  are  supplied  by  or 
under  the  control  of  the  same  company.  Similar  conditions 
affect  this  class  of  business  as  apply  to  the  ordinary  mer- 
cantile lines. 

8 — FBATEBNAL   OBDEBS. 

The  officers  of  fraternal  orders,  as  a  rule,  are  selected  from 
their  fellow  members  on  account  of  their  special  fitness  for 
positions  of  trust,  while  an  "  esprit  de  corps  "  exists  in  most 
lodges  which  causes  pride  to  be  taken  in  the  good  record 
of  such  a  body  and  creates  a  great  desire  to  avoid  unfavor- 
able publicity.  These  facts  serve  to  make  the  loss  ratio  upon 
bonds  in  favor  of  fraternal  orders  comparatively  low,  and 
the  business  is,  therefore,  very  much  sought  after.  A  great 
many  of  the  shortages  which  occur  never  come  to  the  knowl- 
edge of  anyone  outside  of  the  lodge,  while  in  some  cases, 

28 


FIDELITY   INSURANCE    AND    CORPORATE   SURETYSHIP 

where  the  surety  may  be  notified,  the  fellow  members  of  the 
defaulting  officer  will  themselves  make  good  the  loss  in  order 
to  prevent  prosecution  or  even  publication  of  the  existence 
of  dishonesty  in  their  organization.  The  amount  of  salvage 
obtained  where  claims  are  made  in  this  class  of  business 
is  consequently  great.  As  comparatively  small  amounts  are 
usually  involved  and  a  close  check  maintained  upon  receipts 
and  expenditures,  in  addition  to  a  thorough  examination 
of  accounts,  the  business  is  properly  entitled  to  the  com- 
paratively low  rate  at  which  it  is  generally  written. 

Fraternal  orders  may  be  considered  as  of  two  varieties: — 
organizations  where  social  or  similar  features  are  pre-emi- 
nent, and  purely  beneficial  orders  operated  along  insurance 
lines.  Statistics  show  that  the  latter  class  is  more  hazardous 
than  the  former,  and  that  they  must  be  underwritten  with 
more  care.  This  difference  arises  chiefly  in  the  fact  that  the 
latter  are  operated  for  profit  rather  than  from  a  purely 
fraternal  motive,  and  also  because  of  the  fact  that  the  amount 
of  funds  handled  is  greater  than  in  the  former. 

New  orders,  or  those  in  which  the  dues  or  assessments  are 
unusually  low,  should  be  looked  into  very  carefully;  and 
in  all  instances,  where  a  large  volume  of  business  is  offered, 
it  should  be  accompanied  by  the  surety  history  of  the  or- 
ganization, together  with  full  information  as  to  its  origin 
and  purpose.  With  these  facts  satisfactorily  established,  an 
investigation  should  be  made  as  to  the  standing  of  the  men 
at  the  head  of  the  order  to  be  certain  that  its  objects  and 
purposes  are  legitimate  and  not  of  tho  "  mushroom  "  variety. 

9 — LABOR  UNIONS. 

Taken  as  a  whole,  this  business  has  in  the  past  been  a 
source  of  expense  rather  than  a  profit  to  most  surety  com- 
panies which  have  written  it.  This  is  especially  so  in  cer- 
tain localities,  principally  on  account  of  the  personnel  and 
the  secondary  objects  of  the  organizations  as  conducted  to-day. 
Without  criticizing  the  fundamental  ideas  upon  which  unions 

20 


FIDELITY  INSURANCE  AND  CORPORATE   SURETYSHIP 

are  organized,  as  a  matter  of  fact,  these  principles  quite 
unfortunately  are  frequently  subordinated  to  other  ends  which 
make  the  organizations,  at  times,  a  menace  to  business  rather 
than  a  helpful  adjunct.  From  the  surety's  standpoint  the 
offices  are  frequently  filled  by  men  who  are  selected  from 
a  very  undesirable  class  of  citizens,  so  that  many  minor 
although  at  times  important  positions  are  filled  by  men 
whose  sole  aim  is  personal  advantage  rather  than  the  gen- 
eral good  of  labor  in  its  relation  to  capital.  This  makes 
itself  very  evident  in  times  of  labor  disorders,  strikes,  or 
lockouts,  when  the  members  are  contributing  to  an  emergency 
fund  which  amounts  frequently  to  a  large  sum.  Owing  to 
the  authority  given  at  such  times  to  the  officers  of  unions 
and  to  the  general  disorder  and  confused  conditions  that 
exist,  the  temptation  to  use  these  funds  is  very  great,  par- 
ticularly if  the  man  bonded  is  cramped  financially  by  lack 
of  work. 

Statistics  show  that  the  amount  of  salvage  on  this  busi- 
ness is  practically  nil,  for  there  is  no  special  pride  as  to 
the  integrity  or  standing  of  the  union,  as  would  be  the  case 
were  labor  unions  conducted  on  the  fraternal  order  basis. 
Therefore,  these  risks,  if  written,  should  be  considered  strictly 
upon  their  individual  merits,  and  it  is  reasonable  to  assert 
that  unless  the  men  bonded  are  owners  of  real  property  and 
have  family  ties  and  responsibilities,  the  business,  if  taken, 
will  result  in  a  net  loss. 

10 — BUILDING    AND    LOAN    ASSOCIATIONS. 

The  business  offered  by  these  organizations  can  be,  if 
properly  handled,  as  profitable  and  as  satisfactory  as  any 
in  the  fidelity  line,  for  it  presents  fewer  complications  of 
conditions.  The  effective  checks  and  safe-guards  generally 
thrown  around  the  officersj  the  fact  that  they  are  in  the 
majority  of  cases  men  of  standing  and  prominence  in  their 
locality,  frequently  being  owners  of  real  estate  and  having 
good  incomes  from  their  regular  lines  of  business  or  employ- 

30 


FIDELITY  INSURANCE   AND   CORPOBATE   SURETYSHIP 

ment,  combine  to  make  the  bonds  desirable.  There  is  hardly 
a  town  in  the  country  in  which  there  are  not  one  or  more  of 
these  organizations,  and  while  to  some  extent  personal  surety 
is  in  vogue,  the  business  is  one  which  an  agent  or  solicitor 
should  never  overlook. 

11 — CLUBS — SOCIAL,   ETC. 

This  business  is  written  with  caution  by  surety  companies, 
chiefly  on  account  of  the  authority  allowed  the  employees  of 
such  organizations  and  the  lax  checking  systems  in  common 
use.  Bonds  on  behalf  of  stewards  are  especially  hazardous,  be- 
cause their  opportunities  to  commit  peculations  are  extraordi- 
narily great.  Most  of  them  are  given  full  authority  in  buying 
provisions  and  supplies,  and  frequently  pay  for  the  same  from 
a  fund  in  their  possession  upon  which  there  is  no  adequate 
check.  In  many  cases  they  augment  their  salaries  by  means 
of  a  percentage  on  the  goods  they  purchase  and  count  upon 
such  income  in  estimating  personal  expenses,  which  is  very 
apt  to  bring  about  a  shortage  sooner  or  later.  Often,  too, 
they  have  charge  of  provisions,  liquors,  etc.,  with  the  oppor- 
tunity of  disposing  of  them  in  small  quantities  to  their  per- 
sonal advantage.  It  is  this  feature  which  renders  the  risks 
of  stock  and  supply  clerks  in  clubs  undesirable  in  most  in- 
stances. 

The  bonds  of  office  employees  are  usually  acceptable,  if  sur- 
rounded by  features  which  afford  the  surety  company  reason- 
able protection,  and  in  some  cases  where  the  check  is  com- 
plete, the  bonds  of  clerks  in  charge  of  and  connected  with 
supply  and  store  rooms  may  be  written. 

12 — BUSINESS     AND     CHARITABLE     ASSOCIATIONS     OTHER     THAN 
FRATERNAL    ORDERS    AND    SOCIAL    CLUBS. 

This  group  embraces  charitable  and  philanthropic  organiza- 
tions, business  and  professional  men's  associations,  chambers 
of  commerce,  boards  of  trade,  and  all  bodies  formed  for  the 

31 


FIDELITY  INSURANCE  AND  COBPOBATE   SURETYSHIP 

advancement  of  mutual  interest  though  not  necessarily  for 
financial  profit.  The  business  is  sought  after,  as  the  officers 
frequently  serve  without  pay,  and  are  men  of  high  standing. 
The  feature  which  should  be  looked  into  most  carefully  in 
connection  with  such  risks  is  that  of  the  limitation  placed 
upon  the  disbursement  of  funds.  As  a  rule,  the  funds  are 
usually  controlled  by  one  man,  and  if  this  condition  exists  and 
cannot  be  altered,  it  should  be  ameliorated  as  far  as  possible 
by  thorough  and  frequent  examinations. 

13 — AMUSEMENT    ENTERPRISES. 

Theaters,  skating  rinks,  summer  resort  parks,  etc.,  are  con- 
sidered under  this  title.  As  the  conditions  under  which 
money  is  handled  in  these  enterprises  vary  so  greatly,  no 
general  rule  can  be  laid  down.  Although  this  business  is  cer- 
tainly more  than  usually  hazardous  (owing  to  the  environ- 
ment, the  moral  hazard  is  not  good),  and  is  rarely  solicited 
by  surety  companies,  it  is  possible,  however,  to  provide  a 
sufficiently  effective  checking  system  in  some  of  these  lines 
to  enable  them  to  be  written  with  profit. 

14 — MISCELLANEOUS    MERCANTILE. 

Under  this  title  may  be  grouped  various  lines  of  human 
endeavor,  some  of  them  extensive  and  others  restricted  as  to 
their  fields  of  operation,  which  are  surrounded  by  conditions 
so  peculiar  to  themselves,  from  a  surety  viewpoint,  that  in  a 
general  exposition,  they  cannot  be  treated  individually. 
Among  them  may  be  mentioned  the  grain  industry  of  the 
Northwest,  the  lumber  and  oil  business  which  is  widely  scat- 
tered, the  sugar,  cotton  and  tobacco  business  of  the  South,  and 
numerous  smaller  interests  which  have  their  peculiar  features 
as  far  as  their  relation  with  surety  companies  is  concerned. 
Under  this  head,  also,  come  the  various  instances  of  Fidelity 
Bonds  which  are  required  for  persons  occupying  positions  of 
trust  where  the  conditions  calling  for  suretyship  are  out  of 
the  ordinary. 

32 


FIDELITY   INSURANCE    AND    CORPORATE    SURETYSHIP 

As  a  general  thing,  most  of  these  risks  will  require  the 
execution  of  a  bond  of  the  kind  mentioned  under  numbers 
two  and  three  of  the  "  Division  of  Fidelity  Bonds "  at  the 
beginning  of  this  chapter.  Where  unusual  risks  are  presented 
reference  should  be  had  to  the  subject  of  "General  Fidelity 
Bond  Forms  "  which  follows. 

GENERAL    FIDELITY    BOND    FORMS.* 
(Excluding  Bank  Bond  Forms,  see  page  44.) 

Fidelity  Bond  forms  may  be  divided  into  three  general 
kinds.  Individual,  Schedule  and  Blanket. 

1 — The  Individual  Bond  Form. — This  form  is  drafted  to 
cover  one  person  in  his  special  position.  It  usually  requires 
the  signature  of  the  employee.  It  is  used  by  many  concerns, 
even  though  they  have  a  large  number  of  employees,  when 
they  desire  separate  instruments  for  each  employee,  or  when 
the  period  covered  by  the  bond  begins  and  ends  at  different 
dates. 

2 — Schedule  Bond  Form. — A  Schedule  Bond  is  written  for 
the  convenience  both  of  the  surety  and  assured  in  cases  where 
the  latter  can  or  does  have  all  bonds  of  his  employees  expire 
simultaneously.  The  various  amounts  for  which  the  employees 
are  bonded  are  shown  opposite  their  names  on  a  "  schedule  " 
or  list  attached  to  the  bond  and  becoming  part  thereof.  This 
form  is  not  signed  by  the  individual  employee  and  can  be 
used  by  concerns  employing  three  or  more  persons.  The  Sched- 
ule Form  should  not  be  confused  with  the  Blanket  Form. 

3— Blanket  Bond  Form. — The  Blanket  Form  of  bond  haa 
practically  been  eliminated  by  surety  companies.  It  was  a  form 
drawn  to  cover  any  and  all  employees  of  a  concern,  regardless 
of  the  positions  held  by  them,  for  the  full  amount  specified 
in  the  bond,  and  thereby  differed  from  the  Schedule  Bond  in 


See  sample  form  of  Fidelity  Bond,  Appendix,  pages   187-194. 
33 


FIDELITY  INSURANCE   AND  CORPORATE   SURETYSHIP 

which  the  employees  are  listed  and  the  specific  amount 
of  liability  shown  for  each  particular  employee.  It  has  prac- 
tically gone  out  of  existence,  having  been  superseded  by  the 
Schedule  Form,  owing  to  the  fact  that  the  latter  is  more 
economical  to  the  employer  and  furnishes  him  with  the  pro- 
tection he  needs  in  case  of  each  employee;  whereas  in  a 
Blanket  Bond  the  liability  shown  in  the  bond  is  many  times 
in  excess  of  the  amount  required  for  minor  employees.  Never- 
theless, the  premium  was  computed  on  the  total  amount  of 
liability,  irrespective  of  the  actual  liability  on  the  minor 
employees. 

FURTHER  DIVISION  OF  FIDELITY  BOND  FORMS  WITH 
RESPECT  TO  THE  GENERAL  GROUPS.* 

1 — FORM    OF    FIDELITY   BOND    PROPER,    PROTECTING    AGAINST   DIS- 
HONESTY  ONLY. 

In  the  first  group  is  placed  the  form  of  bond  used  in  the 
majority  of  fidelity  cases.  This  is  the  form  that  all  surety 
companies  endeavor  to  use  when  called  upon  to  assume  surety- 
ship. While  in  minor  particulars  the  forms  of  different  com- 
panies vary,  they  are  similar  in  the  essential  features. 

The  bond  form  itself  closely  approximates  a  policy  of  in- 
surance, and  the  initial  liability  of  the  surety  is  predicated 
upon  at  least  one  and  usually  two  requirements,  namely:  the 
payment  of  the  premium,  and  the  filing  by  the  employer  with 
the  surety  of  certain  certificates  and  statements  relative  to 
the  duties  of  the  employee  and  the  plan  upon  which  the  busi- 
ness is  conducted. 

On  the  subject  of  payment  of  premiums  little  need  be  said, 
as  this  feature  of  corporate  insurance  or  suretyship  is  thor- 
oughly understood,  and  an  agent  who  has  at  heart  the  in- 
terests of  his  clients  will  allow  no  delay  in  collecting  prem- 


*  See  pages  9-10,  supra. 

34 


FIDELITY   INSURANCE   AND   COEPOBATE   SURETYSHIP 

iums,  thus  making  the  instrument  which  he  has  delivered  a 
valid  one  upon  which  the  assured  may  make  recovery  for  the 
loss  he  may  sustain. 

The  statements  required  of  the  employer  which  constitute 
warranties  under  the  bond  are  in  many  instances  not  given 
proper  consideration,  and  too  much  stress  cannot  be  placed 
upon  the  accuracy  and  detail  with  which  these  statements 
are  to  be  made  and  the  proper  form  in  executing  this  instru- 
ment. As  the  bond  is  essentially  a  contract  involving  the 
payment  of  money,  of  which  the  premium  is  the  considera- 
tion, it  involves  certain  obligations  on  the  part  of  the  assured 
as  well  as  the  surety,  and  in  order  to  make  a  statement  of 
these  obligations  easy  to  comply  with,  the  surety  asks  the 
necessary  questions  categorically  upon  a  form  prepared  for 
the  purpose  of  giving  the  assured  the  least  trouble  in  replying. 
The  assured  should  reply  to  these  questions  with  frankness, 
clearness,  and  above  all,  with  absolute  truthfulness,  for  failure 
on  his  part  to  have  conformed  with  the  terms  of  the  warran- 
ties which  he  himself  has  made  will  very  properly  furnish 
ground  for  denial  of  liability  on  the  part  of  the  surety.  It  is, 
therefore,  important  that  every  detail  of  the  system  be  lived 
up  to,  and  if  it  becomes  necessary  to  effect  a  change  in  the 
same  the  surety  should  be  informed  of  such  change,  and  its 
assent  obtained. 

Aside  from  the  above  features,  the  usual  Fidelity  Bond  dif- 
fers from  the  old  common  law  form,  or  that  form  of  bond 
which  carries  with  it  no  conditions  or  provisions  for  the 
protection  of  the  surety,  principally,  in  that  the  former  is  a 
term  instrument  and  the  liability  of  the  surety  covers  only 
the  acts  of  the  principal  committed  within  a  certain  specified 
period,  which  are  discovered  and  notification  thereof  filed 
with  the  surety.  To  provide  for  continuing  the  guarantee,  a 
provision  is  inserted,  usually  by  means  of  a  separate  instru- 
ment designated  as  an  extension  or  continuation  certificate, 
the  issuance  of  which  is  optional  with  the  surety,  just  as  its 
acceptance  is  optional  with  the  assured. 

35 


FIDELITY   INSURANCE   AND  CORPORATE    SURETYSHIP 

Clauses  Usually  Found  in  Fidelity  Bonds.* 

In  addition  to  the  above,  the  usual  form  of  Fidelity  Bond 
contains  the  following  clauses,  which  may  be  briefly  explained 
as  follows: 

Termination  by  Claim. — When  a  claim  is  made  under  a 
Fidelity  Bond,  it  is  only  right  and  proper  that  the  surety 
should  be  relieved  of  further  liability  on  account  of  the  de- 
faulting employee  as  to  any  act  or  acts  committed  subse- 
quent to  the  discovery  of  the  loss  which  was  the  basis  of 
the  claim.  The  purpose  for  which  the  bond  was  taken  out 
has  been  fulfilled,  or  is  in  process  of  fulfillment,  and  the 
premium  charged  is  based  upon  the  assumption  that  the 
surety  will  not  continue  liability  on  behalf  of  an  employee 
who  has  once  betrayed  a  trust. 

Notification  of  Conduct. — The  notification  of  conduct  clause 
provides  that  the  surety  shall  at  once  be  notified  where 
knowledge  comes  to  the  employer  that  the  principal  under 
the  bond  is  engaged  in  speculation,  gambling,  or  any  dis- 
reputable and  unlawful  habits  or  pursuits.  The  justice  of 
this  can  readily  be  seen,  when  it  is  considered  that  the  obliga- 
tion is  assumed  upon  the  decision  of  the  surety  that  none  of 
these  things  exist  in  the  principal,  as  well  as  on  the  ground 
that  the  employer  does  not  wish  in  his  service  one  who  is  in 
any  way  below  the  standard  of  morality  or  honor  set  by  the 
surety.  In  order  to  protect  itself  in  event  of  the  failure  of 
the  employer  to  comply  with  these  requirements,  the  surety 
usually  inserts  a  provision  to  render  its  liability  void  if  the 
employer  shall  entrust  the  employee  with  money,  securities, 
or  other  property,  after  having  discovered  an  act  of  dis- 
honesty, or  having  condoned  an  act  for  which  the  surety 
might  be  liable.  This  provision  is  sometimes  made  to  apply 
to  any  settlement  made  with  the  employee  for  a  shortage 
without  previous  notice  to  and  consent  of  the  surety. 


*  See  specimen  Fidelity  Bond  Form,  Appendix,  page  187. 
3« 


FIDELITY   INSURANCE   AND   CORPORATE   SURETYSHIP 

Proportionate  Loss. — This  is  a  well-recognized  principle  of 
insurance,  and  it  is  easily  understood  why  it  is  necessary  to 
insert  a  provision  which  would  prevent  an  employer  from 
obtaining  more  than  one  recovery  on  account  of  the  same  loss. 

Cancellation. — In  order  that  the  surety  may  avail  itself  of 
the  information  furnished  it  under  the  "  Notification  of  Con- 
duct "  clause,  or  of  any  one  of  a  number  of  conditions  which 
might  arise  around  any  given  risk,  it  is  necessary  that  a  provi- 
sion for  cancellation  be  inserted.  The  period  which  must 
elapse  before  such  notice  becomes  effective  varies  with  different 
companies.  In  some  instances  it  is  immediate,  and  in  others, 
five,  ten,  fifteen,  thirty,  and  even  sixty  or  ninety  days,  the 
circumstances  being  governed  by  the  nature  of  the  risk  and 
of  the  line  of  business  in  which  it  is  assumed. 

It  is  customary,  and  in  some  states,  compulsory,  for  the 
surety,  when  cancelling,  to  return  to  the  assured  the  pre- 
mium paid  less  a  pro  rata  part  for  the  time  the  bond 
shall  have  been  in  force,  and  to  remain  liable  for  any  acts 
committed  prior  to  the  date  of  cancellation.  While  in  many 
forms  there  is  no  provision  inserted  for  cancellation  by  the 
assured,  it  is  universally  permitted,  and  upon  such  cancella- 
tion, it  is  customary  to  return  that  part  of  the  premium  con- 
sidered unearned  in  accordance  with  the  standard  short  rate 
tables. 

The  Arrest  Clause. — One  of  the  most  important  features  of 
the  ordinary  Fidelity  Bond  is  the  "  Arrest  Clause,"  which  re- 
quires that  the  employer  shall,  when  required  by  the  surety, 
apply  for  a  warrant  for  the  arrest  of  a  defaulting  employee 
on  account  of  whom  claim  has  been  filed.  It  is  usually  agreed 
that  the  cost  of  such  proceedings  will  be  borne  by  the  surety, 
and  the  assured  is  only  required  to  give  his  aid,  information, 
and  moral  support  to  bring  the  defaulting  employee  to  jus- 
tice or  to  aid  the  surety  to  obtain  reimbursement  or  salvage 
for  any  loss  which  it  may  have  paid. 

Limitation  of  Suit. — As  the  statutes  of  limitation  of  the 
various  states  exhibit  an  amazing  lack  of  uniformity,  and  be- 

37 


FIDELITY  INSURANCE   AND   COBPOBATE    SUBETYSHIP 

cause  a  claim  reserve  maintained  for  one  year  on  a  loss  in  one 
state  might  have  to  be  maintained  for  twelve  years  in  another, 
the  management  of  surety  companies  make  it  necessary  that 
they  incorporate  in  their  bond  a  specified  period  within  which 
suit  may  be  brought  after  claim  has  been  filed.  Like  the  can- 
cellation period,  this  term  is  not  constant,  but  varies  from 
six  months  to  one  or  two  years.  It  is  a  provision  which  is 
almost  necessary  if  surety  companies  are  to  do  business  under 
the  rulings  and  restrictions  placed  around  them  by  the  Fed- 
eral, as  well  as  the  various  state  laws. 

The  Extent  of  the  Guarantee. — No  matter  what  the  provi- 
sions or  lack  of  them  in  a  Fidelity  Bond  may  imply,  the  most 
important  feature  of  the  bond  is  included  in  the  words  which 
are  used  to  define  or  limit  the  surety's  liability.  The  word 
"  dishonesty  "  is  a  very  broad  term,  and  in  the  several  defini- 
tions of  it  included  in  the  dictionaries,  it  may  cover  any 
breach  of  trust  or  confidence,  and  even  a  violation  of  moral 
principles  where  trust  or  confidence  has  not  been  reposed.  It 
is  necessary,  therefore,  to  restrict  the  guarantee  by  the  use  of 
such  words  as  larceny,  embezzlement,  fraud,  etc.,  and  while 
some  companies  may  draw  their  bonds  to  cover  "  personal  dis- 
honesty "  or  "  fraud  and  dishonesty,"  it  is  the  common  prac- 
tice to  guarantee  only  against  larceny  or  embezzlement.  If 
other  words  are  used,  they  are  not  intended  to  create  a  broader 
guarantee,  and  are  limited  and  defined  by  the  clause  "  amount- 
ing to  larceny  or  embezzlement." 

The  necessity  for  this  restriction  is  explained  by  the  fact 
that  one  of  the  greatest  protections  which  a  surety  has  is  the 
right  of  criminal  prosecution.  In  practically  all  states 
larceny  and  embezzlement  have  been  defined  and  classed  as 
crimes  or  misdemeanors;  whereas,  the  mere  word  "dishon- 
esty "  and  even  "  fraud  "  may  sometimes  fail  to  constitute  an 
offense  for  which  the  perpetrator  could  be  criminally  pun- 
ished. An  underwriter  should  in  all  cases  familiarize  himself 
with  the  laws  of  each  particular  state  on  these  points.  This  is 


FIDELITY   INSURANCE    AND    CORPORATE   SURETYSHIP 

especially  true  of  an  agent  who  may  at  any  time  be  called  upon 
to  adjust  a  fidelity  claim.  It  sometimes  happens  that  a  Fidel- 
ity Bond  will  guarantee  faithful  performance  of  duty,  compli- 
ance with  a  contract  of  employment,  or  some  other  feature, 
but  these  terms  are  rarely,  if  ever,  incorporated  in  the  stand- 
ard fidelity  forms  of  surety  companies. 

2 — FORM   OF  BOND    COVERING    MORE   THAN   DISHONESTY. 

Where  an  employer  wishes  a  guarantee  against  loss  on  ac- 
count of  something  more  than  defined  "  dishonesty,"  surety 
companies  writing  such  bonds  are  entering  into  a  branch  of 
the  business  upon  which  it  has,  as  yet,  been  impossible  to  ob- 
tain accurate  statistics.  The  most  usual  requests  of  this 
character  are  for  the  incorporation  of  a  clause  in  a  Fidelity 
Bond  to  cover,  in  addition  to  dishonesty,  culpable  negligence 
or  noncompliance  with  certain  rules  or  regulations  promul- 
gated by  the  employer. 

The  Culpable  Negligence  Bond  is  in  common  use  where  the 
operating  employees  of  a  common  carrier  are  covered.  This 
clause  is  requested  by  railroads,  street  railways,  steamship 
and  express  companies.  If  what  shall  constitute  "  culpable 
negligence  "  is  carefully  and  properly  defined  in  the  bond,  and 
an  adequate  premium  charge  is  obtained,  there  is  no  reason 
why  a  surety  company  cannot  write  such  bonds  with  profit,  al- 
though in  so  doing,  they  assume  a  risk  which  more  resembles  a 
Faithful  Performance  of  Duty  Bond.  (See  chapter  IX.)  The 
inability  to  proceed  against  an  employee  who  has  caused  a 
loss  by  negligence  except  through  a  civil  action,  and  the  fact 
that  most  employees  covered  under  such  a  guarantee  are  not, 
as  a  rule,  owners  of  property  makes  the  amount  of  salvage 
obtainable  very  small,  and  the  difficulties  of  collecting  it  great. 

A  clear  idea  of  the  circumstances  under  which  culpable  neg- 
ligence may  be  made  part  of  a  surety  company's  guarantee  can 
best  be  imparted  by  giving  the  following  definition  found  in 

39 


FIDELITY  INSURANCE  AND  CORPORATE   SURETYSHIP 

a  bond,  which  is  as  broad  as  experience  in  bonds  of  this  char- 
acter indicates  that  it  may  safely  be. 

" '  CULPABLE  NEGLIGENCE  '  as  used  in  this  bond  shall  be 
held  to  mean  only  gross  carelessness  or  aggravating  and  inex- 
cusable negligence  in  the  performance  or  omission  of  duties. 
The  term  '  negligence '  as  limited  by  the  word  *  culpable ' 
being  intended  to  mean  wilful  negligence  of  the  employee, 
resulting  in  pecuniary  loss,  from  his  deliberate  assumption 
of  risk,  in  violation  of  instructions,  and  with  foreknowledge 
that  his  so  doing  might  cause  pecuniary  loss  to  the  employer. 
Mere  oversight,  forgetfulness,  temporary  loss  of  memory,  error 
of  judgment  or  failure  to  recognize  the  necessity  or  wisdom 
of  any  course  of  action  shall  not  be  so  construed,  and  it  shall 
be  the  burden  of  the  employer  to  reasonably  prove  that  the 
employee  was  not  mentally  or  physically  incapable,  or  of  in- 
sufficient education  to  efficiently  perform  the  duties  assigned 
to  such  employee  and  the  company  shall  not  be  responsible 
for  any  loss  due  to  the  failure  of  any  employee  to  properly 
compute  or  collect  freight  or  other  charges,  unless  such  fail- 
ure be  caused  by  culpable  negligence  on  the  part  of  said 
employee  as  herein  defined,  and  the  company  shall  not  be  re- 
sponsible for  proper  accounting  for  missing  tickets,  unless 
such  tickets  are  actually  used  for  passage;  the  company  shall 
not  be  liable  for  any  loss  or  damage  occasioned  by  the  insol- 
vency of  any  bank,  depository  or  other  institution  where 
moneys,  securities  or  other  property  may  have  been  or  are 
deposited,  or  loss  or  damage  occasioned  by  failure,  neglect  or 
omission,  to  withdraw  said  moneys,  securities  or  property 
from  such  bank  depository  or  institution,  prior  to  such  in- 
solvency; nor  for  any  other  cause  or  causes  save  those  specifi- 
cally set  forth  therein." 

The  question  of  guaranteeing  the  compliance  with  rules 
or  regulations  or,  perhaps,  a  constitution  and  by-laws  is  one 
that  depends  absolutely  upon  the  nature  of  the  requirements 
therein.  If  any  element  enters  into  them  which  places  com- 
pliance in  any  particular  beyond  the  individual  control  of  the 
principal  under  the  bond,  it  cannot  be  considered  in  this  con- 
nection. If,  however,  the  guarantee  following  out  their  pro- 
visions is  simply  a  physical  act,  not  involving  special  judg- 
ment, knowledge,  ability,  skill,  or  accuracy,  the  bond  is  one 
which  a  surety  could  execute. 

40 


FIDELITY   INSURANCE    AND    CORPORATE    SURETYSHIP 
3 — FORM  OF   BOND   COVERING   EXCEPTIONAL  CONDITIONS. 

Under  this  heading  are  grouped  bonds  which  cover,  in 
addition  to  dishonesty  and  negligence,  property  responsi- 
sibility  or  other  circumstances  over  which  the  principal 
may  have  no  control.  From  the  surety  standpoint,  the 
usual  bond  form  required  under  this  head  is  generally  so 
broadly  drawn  as  to  cover  the  faithful  performance  of  duty  in 
connection  with  handling  funds.  The  phrasing  of  such  bond 
is  frequently  such  as  to  require  the  most  skillful  underwriter 
to  be  able  to  determine  the  conditions  under  which  loss  may 
arise.  In  its  usual  application  it  involves  a  guarantee  that 
all  funds  passing  through  the  hands  of  the  principal,  actually 
or  theoretically,  will  be  turned  over  to  the  person  or  persons 
authorized  to  receive  them.  If  these  funds  are  in  a  large 
amount,  it  is  probably  necessary  for  their  proper  handling  that 
the  principal  require  the  assistance  of  subordinates  and  bring 
into  use  a  bank  depository,  which  may  be  selected  by  himself. 
Such  bonds  also  contemplate  not  only  the  faithful  performance 
and  proper  accounting  as  regards  money,  but  the  proper  keep- 
ing of  records,  the  exercise  of  judgment  and  discretion  in  ad- 
ministering the  duties  of  the  office  guaranteed,  and  even  in 
some  instances  the  avoiding  of  legal  entanglements  between 
the  employer  and  outside  parties.  The  circumstances  which 
may  arise  under  a  bond  of  this  kind  and  cause  loss  to  the 
surety  are  too  varied  to  be  discussed.  This  business,  however, 
has  many  speculative  characteristics  which  make  it  difficult 
to  write  on  a  true  insurance  basis. 

Where  the  question  of  the  proper  conduct  of  a  subordinate 
is  concerned,  the  bond  may  frequently  be  arranged  by  requir- 
ing that  such  employees  in  turn  give  bonds  to  their  superior, 
while  depository  liability  may  be  somewhat  removed  by  re- 
quiring that  the  bank  be  designated  by  the  employer.  But 
even  with  these  two  elements  of  hazard  eliminated,  the  bond 
is  still  open  to  claim  from  other  contingencies. 

41 


FIDELITY  INSURANCE  AND  CORPORATE   SURETYSHIP 

Instruments  of  this  character  are  frequently  required  by 
fraternal  orders,  and  where  such  is  the  case  the  premium  at 
which  it  may  be  written  must  be  at  least  100%  greater  than 
that  required  for  the  standard  restricted  fidelity  form. 

Certain  lines  of  business  require,  to  meet  the  peculiar  con- 
ditions surrounding  them,  special  forms  of  bonds  which  shall 
guarantee  more  than  honesty  only.  A  notable  example  of  this 
is  the  form  in  common  use  in  connection  with  the  grain  ele- 
vator industry.  In  that  section  of  the  country  where  grain 
is  most  largely  produced,  the  producer  conveys  it  to  the  near- 
est warehouse  for  storage,  and  eventual  sale  and  shipment. 
Upon  depositing  this  product,  he  receives  from  the  agent 
or  custodian  a  receipt  ( usually  negotiable ) .  In  bonding 
an  agent  receiving  grain  and  issuing  such  receipts,  it  is 
customary  to  require  one  which  shall  cover  loss  occasioned  by 
the  shrinkage  in  weight  or  bulk  of  the  grain,  loss  by  rotting, 
or  the  action  of  the  elements,  as  well  as  loss  by  reason  of  stor- 
age in  defective  bins,  etc.  These  features  are  usually  con- 
templated and  set  forth  in  the  bond  itself,  but  as  the  guaran- 
tee is  so  worded  that  the  agent  is  to  turn  over  all  grain  for 
which  he  has  issued  receipts,  it  can  readily  be  seen  that  a  loss 
could  be  caused  the  surety  by  faulty  scales  or  measures,  by 
theft  on  the  part  of  a  third  party,  or  otherwise. 

Another  bond  somewhat  similar  is  that  required  of  ware- 
housemen or  custodians  in  charge  of  a  warehouse  receiving 
and  issuing  receipts  for  goods  or  commodities  of  almost  every 
kind,  and  the  hazard  is  always  increased  if  such  receipts  are 
negotiable.  This  is  true  whether  the  bond  runs  to  the  owner 
of  the  warehouse,  or  to  the  bank  which  discounts  the  receipts 
issued.  Much  depends  upon  the  nature  of  the  product  so 
handled.  For  instance,  where  pig  iron  is  concerned,  the  risk 
is  not  as  great  as  though  the  bond  covered  a  warehouseman 
handling  tobacco,  cotton,  or  other  easily  injured  or  perishable 
products. 

42 


FIDELITY  INSURANCE   AND   CORPORATE   SURETYSHIP 

It  is  evident,  that  while  the  greater  portion  of  human- 
ity may  be  safely  trusted  in  a  fiduciary  capacity — that 
is  to  refrain  from  a  willful  act  of  dishonesty — the  cir- 
cumstances are  altered  when  an  effort  is  made  to  guarantee  by 
a  Fidelity  Bond  that  something  will  or  will  not  occur  that 
may  be  beyond  the  power  of  the  principal  to  bring  about  or  to 
prevent.  Every  underwriter  should  constantly  be  on  the  alert 
to  discover  in  the  wording  of  a  special  bond  form  any  feature 
which  involves  insurance  which  is  other  than  fidelity.  In 
some  instances,  these  features,  although  almost  hidden,  are 
sources  of  the  greatest  danger.  The  forms  in  which  these 
"  lions  in  sheep's  clothing "  may  be  brought  to  the  attention 
of  an  underwriter  are  so  numerous  that  only  a  general 
warning  can  be  issued.  Every  form  of  bond  with  which  the 
agent  is  not  thoroughly  familiar,  whether  through  inexperi- 
ence of  not  having  written  it  before,  or  on  account  of  not 
having  adjusted  claims  under  it,  should  be  analyzed  in  every 
feature,  for  latent,  remote,  and  probable,  liability. 

DIFFERENCES  IN  METHODS  OF  CARRYING  OUT  THE 
VARIOUS  CLAUSES. 

The  methods  of  carrying  out  many  of  the  provisions  of  the 
above  clauses  must  accord  with  the  policy  of  the  company 
issuing  the  bond ;  for  instance,  where  one  company  will  require 
telegraphic  notification  of  a  shortage,  another  will  accept 
notice  by  registered  mail  or  perhaps  personal  notice  to  its 
agent  at  a  stated  point.  The  same  differences  may  be  noted 
in  respect  to  various  miscellaneous  clauses  which  are  inserted 
from  time  to  time  in  the  bonds  drawn  by  different  companies. 
Some  of  these  clauses  are  rendered  necessary  by  the  laws  of 
certain  states,  while  others  are  merely  additional  methods  of 
insuring  protection  to  the  surety  or  extending  concessions  to 
the  assured. 

43 


FIDELITY   INSURANCE   AND   CORPOBATE    SURETYSHIP 

BANK  BOND  FORMS.* 

The  form  of  Bank  Bonds  is  of  sufficient  importance 
to  receive  special  notice,  for  the  reason  that  the  American 
Bankers'  Association  has  prepared  and  published  a  copy- 
righted form  of  bond  which  members  of  that  Association  usu- 
ally ask  to  have  written.  There  is  no  objection  on  the  part  of 
surety  companies  to  writing  this  form,  but  it  necessarily 
demands  a  higher  rate  than  most  of  the  bonds  which  the 
companies  themselves  prepare  and  issue.  A  thorough  synop- 
sis of  the  American  Bankers'  Association  form  will  not 
be  given.  Simply  stated,  the  important  differences  be- 
tween it  and  the  form  as  used  by  most  of  thej  com- 
panies for  bank  business  are  as  follows:  The  American  Bank- 
ers' form  guarantees  against  loss  occasioned  by  dishonesty  on 
the  part  of  an  employee  under  any  circumstances  of  position 
or  employment;  whereas,  the  other  form  covers,  as  a  rule,  only 
personal  dishonesty  in  performing  the  duties  of  some  specified 
position.  The  former  permits  the  transfer  of  employees  from 
one  position  to  another  at  the  employer's  will,  whereas,  the 
latter,  as  a  rule,  requires  notice  to,  and  consent  of  the  surety 
for  this.  In  the  American  Bankers'  Bond  the  employer  is  not 
required  to  swear  out  a  warrant  for  the  arrest  of  a  defaulting 
employee,  while  the  contrary  rule  prevails  in  the  other  obliga- 
tion. In  the  above  features  and  a  few  other  minor  ones,  the 
American  Bankers'  form  is  more  liberal  than  most  forms 
drawn  by  the  companies.  However,  there  are  numerous  points 
in  which  companies  are  willing  to  issue  a  more  liberal  bond, 
so  that  each  and  every  agent  should  study  his  own  company's 
bond  and  compare  it  carefully  with  the  American  Bankers' 
form.  He  will  be  asked  many  times  to  explain  the  differences. 

DIFFERENCES    BETWEEN    THE    FORMS. 

For  convenience,  a  synopsis  of  the  important  clauses  in  the 
two  obligations  may  be  stated  in  parallel  columns  as  follows: 

*  See  Appendix,   pages  194-204. 
44 


FIDELITY   INSURANCE    AND   CORPORATE    SURETYSHIP 


American    Bankers1    Associa- 
tion Form. 

Covers  any  loss  or  damage 
of  funds,  property  or  estate 
belonging  to  or  in  custody  of 
employer. 

Loss  must  be  through  dis- 
honesty or  any  act  of  omis- 
sion done  in  bad  faith. 

Loss  may  occur  in  any 
duty  or  trust  specially  as- 
signed or  otherwise. 

Loss  must  be  discovered 
within  one  year  after  term- 
ination of  bond,  or  of  any 
particular  engagement  as  re- 
gards such  engagement. 

Company  will  pay  to  em- 
ployer the  amount  of  any 
loss  or  damage  three  months 
after  proofs  of  loss  shall  have 
been  furnished. 

If  employer  holds  other 
security  or  indemnity,  com- 
pany is  still  liable  to  limit 
of  its  bond,  but  on  payment 
of  loss,  is  entitled  to  receive 
assignment  of  such  security 
or  indemnity  with  authority 
to  realize  thereon. 

Employer  may  transfer 
employees  at  will  without 
notice  to  company. 

Employer  makes  certain 
warranties  which  are  em- 
bodied in  printed  bond  form. 
(These  warranties  are  not  suf- 
ficient and  company  requires 
Employer's  Statement  in  ad- 
dition.) 


Companies'  Form. 

Covers  pecuniary  loss  em- 
ployer may  sustain  in  money, 
securities  or  other  personal 
property. 

Loss  must  be  through  per- 
sonal dishonesty. 

Loss  must  occur  in  per- 
formance of  duties  specified 
in  warranty  of  employer. 

Loss  must  be  discovered 
within  six  months  after 
termination  of  bond,  or  of 
any  particular  engagement  as 
regards  such  engagement. 

Company  will  reimburse 
employer  for  pecuniary  loss 
three  months  after  satisfac- 
tory proof  of  loss  shall  have 
been  furnished. 

If  employer  holds  other 
security,  employer  is  only 
entitled  to  claim  such  pro- 
portion of  loss  as  company's 
security  bears  to  whole 
amount,  whether  employer  is 
reimbursed  from  other  se- 
curity or  not. 

Employer  must  notify 
company  of  any  interchanges 
and  receive  written  acknowl- 
edgement. 

Employer  makes  no  war- 
ranties in  bond  form,  but 
upon  Employer's  Statement 
which  is  a  condition  prece- 
dent to  issue  of  bond. 


45 


FIDELITY  INSURANCE   AND  CORPORATE    SURETYSHIP 


American    Bankers'    Associa- 
tion Form. 

In  event  of  breach  of  any 
warranty  as  to  any  employee, 
bond  is  void  as  respects  such 
employee  only. 

Company  may  cancel  bond 
on  fifteen  days'  notice  to  em- 
ployer. 

In  event  of  cancellation  as 
to  any  one  employee  by  com- 
pany, employer  may  cancel 
entire  bond  on  same  condi- 
tions, receiving  pro  rata  re- 
turn premium. 

Upon  death,  resignation  or 
discharge  of  any  employee 
during  first  year  of  bond, 
company  deemed  to  have 
earned  whole  of  premium 
paid  on  such  employee.  In 
subsequent  years,  pro  rata 
return  allowed. 

Employer  need  not  cause 
arrest  or  prosecution  of  any 
employee  for  any  offense  in- 
volving liability  of  company, 
but  must  render  all  assist- 
ance (not  pecuniary)  in  ar- 
rest or  prosecution  of  such 
employee  or  in  effort  of  com- 
pany to  obtain  reimbursement 
on  account  of  any  claim  paid. 

Employer  must  file  proof 
of  loss  within  six  months 
after  notification  of  loss  to 
company. 

Knowledge  of  any  officer 
shall  be  considered  as  knowl- 
edge of  employer  unless  such 
officer  be  in  collusion  with 
employee  causing  loss. 


Companies'  Form. 

In  event  of  breach  of  any 
warranty  as  to  any  em- 
ployee, entire  bond  is  void. 


Company  may  cancel  bond 
or  one  month's  notice  to  em- 
ployer. 


Upon  death,  resignation  or 
discharge  of  any  employee 
in  first  or  other  years,  com- 
pany allows  return  premium 
at  usual  short  rates;  except 
where  immediate  substitution 
occurs,  which  company  per- 
mits without  charge. 

Employer  must  cause  ar- 
rest of  any  employee  and 
must  give  all  assistance  (at 
cost  and  expense  of  com- 
pany), in  prosecution  or  ef- 
fort to  obtain  reimburse- 
ment. 


Employer  must  file  proof 
of  loss  within  three  months 
after  notification  of  loss  to 
company. 

Knowledge  of  any  officer 
shall  be  considered  as  knowl- 
edge of  employer  even  though 
such  officer  be  in  collusion 
with  employee  causing  loss. 


CHAPTER  II. 

CONTRACT  CONSTRUCTURAL  BONDS. 

In  a  general  sense  the  term  "  Contract  Bond "  is  applied 
to  a  bond  given  to  carry  out  any  written  contract  or  agree- 
ment. In  this  chapter,  however,  the  discussion  under  this 
general  head,  will  be  limited  to  the  bonds  given  for  structural 
contracts.  These  obligations  are  designated  as  "  Contract  Con- 
structural  Bonds."* 

The  liability  or  risk  under  Contract  Constructural  Bonds 
ranges  from  nil  to  that  of  great  hazard,  and  before  taking 
up  in  detail  the  underwriting  of  this  business,  it  should  be 
impressed  upon  the  reader  that  this  obligation  is,  theoretically 
speaking,  a  credit  or  banking  proposition  and  is  not  figured 
on  an  average  or  insurance  basis,  for  the  reason  that  each 
bond  guarantees  the  fulfillment  of  a  specific  contract,  and  of 
necessity  must  be  considered  distinctly  upon  its  own  merits. 
In  underwriting  Contract  Constructural  Bonds,  they  must  be 
looked  at  from  the  point  of  view  of  a  banker  when  discount- 
ing commercial  paper,  for,  broadly  speaking,  the  surety  com- 
panies practically  endorse  the  note  of  the  applicant  or  con- 
tractor, agreeing  that  he  will  deliver  (or  pay)  to  the  owner 
or  assured  at  a  fixed  date  a  structure  of  a  certain  prescribed 
kind.  As  is  done  in  banking  circles,  it  is  frequently  neces- 
sary, when  the  contractor  has  not  sufficient  means  to  finance 
his  contract,  to  secure  collateral  indemnity  or  personal  se- 
curity for  the  protection  of  the  original  surety. 

It  is  difficult  for  a  field  man,  especially  when  he  is  engaged 
in  other  lines  of  business,  to  recognize  the  great  difference 
between  the  insurance  and  the  so-called  credit  or  banking 


*  Care   should   be   taken   not   to   confuse    these    bonds   with   those 
somewhat  similar,  treated  in  chapter  V. 

47 


FIDELITY   INSURANCE   AND   CORPOBATE   SURETYSHIP 

feature  of  the  surety  business.  One  of  the  causes  for  this 
confusion  is  the  fact  that  in  order  to  get  some  basis  to  de- 
termine the  premium  to  be  charged  for  the  execution  of  Con- 
tract Constructural  Bonds,  it  is  necessary  to  figure  arbitrarily 
on  a  percentage  basis.  This  is  done  merely  for  convenience, 
and  not  with  an  idea  of  naming  a  rate  based  on  the  law 
of  average,  as  a  sufficient  rate  can  never  be  asked  which  would 
make  a  bad  proposition  acceptable  or  even  commensurate  with 
the  risk  assumed. 

The  amount  of  bond  required  as  compared  to  the  contract 
price  varies  materially  according  to  the  whims  or  ideas  of 
the  architects  or  engineers;  and  as  the  liability  of  all  contract 
bonds  depends  upon  the  size  of  the  contract,  the  rate  of 
premium  should  be  charged  on  the  amount  of  the  contract 
price.  For  the  same  reason  that  makes  it  necessary  for  the 
banker  to  secure  all  possible  information  about  a  borrower, 
the  field  representative  should,  before  submitting  or  recom- 
mending a  risk,  investigate  each  and  every  feature  of  the 
same,  ascertaining  whether  the  contractor  has  ever  defaulted; 
whether  he  bears  a  good  reputation,  etc.  The  specifications 
and  conditions  under  which  the  contract  is  to  be  performed 
should  also  be  carefully  scrutinized,  in  order  that  an  intelli- 
gent opinion  of  the  contractor's  ability  to  comply  with  them 
may  be  formed. 

ADVISABILITY  OF  ACCEPTING  A  RISK.* 
The  necessary  points  to  be  considered  in  order  to  properly 
differentiate  a  good  from  a  bad  risk  may  be  generally  sum- 
marized as  follows: 

1 — Nature  of  work  contracted  for. 

2 — Whether  the  contract  price  is  sufficiently  high  to  en- 
able the  contractor  to  make  a  profit. 
3 — The  ability  of  the  contractor  to  complete  the  contract. 
4 — The  amount  of  work  under  way  and  percentage  un- 
completed. 

*  See  Appendix,  page  204. 

48 


FIDELITY  INSURANCE    AND   CORPORATE   SURETYSHIP 

5 — The  conditions  under  which  payments  are  made. 
6 — The  financial  standing  of  the  contractor. 
7 — Age  of  the  contractor. 

CONSIDERATION   OF    SAME. 

1 — Nature  of  the  Work  Contracted  For. — Contract  Con- 
structural  Bonds  can  be  divided  into  three  general  classes 
having  regard  to  the  amount  of  danger  therein  involved. 

a — Sewers  ( closed ) ,  subways,  tunnels,  dredges,  water- 
works, straightening  rivers,  dams,  and  all  other  classes 
of  work  where  the  elements  of  nature  must  be  taken 
into  consideration  and  where  a  contractor  may  meet 
with  conditions  that  he  cannot  foresee  when  bidding 
on  the  work. 

b — Construction  of  open-cut  sewers,  railroad  work  with- 
out tunnels,  or  where  tunnels  are  not  over  one  hun- 
dred feet  in  length,  bridges,  grading,  and  filling,  street 
paving  and  road  building. 

c — Simple  superstructural  contracts,  heating  and  venti- 
lating buildings,  and  for  general  repairs  of  superstruc- 
tures. 

Statistics  prove  that  surety  companies  have  in  the  past 
met  with  very  heavy  losses  on  the  bonds  found  in  class  a 
(supra),  for  the  reason  that  conditions  frequently  arise  which 
were  entirely  unforeseen  to  the  contractor  when  he  under- 
took the  work  and  which  prevent  his  completing  it,  thereby 
causing  default  and  resulting  in  loss  to  the  surety.  Con- 
servative surety  companies  will  only  issue  a  bond  covering 
such  contracts,  when  investigation  discloses  that  the  financial 
strength  of  the  contractor  is  such  as  to  more  than  off-set  any 
of  the  unforeseen  circumstances  which  are  likely  to  come  up. 

The  bonds  classified  under  6  are  less  hazardous  than  the  a 
class,  as  the  elements  of  nature,  which  might  affect  the  work 
can  be  calculated  with  more  certainty. 

49 


FIDELITY   INSURANCE    AND   CORPORATE    SURETYSHIP 

With  regard  to  the  bonds  needed  for  class  c,  experienced 
contractors  should  with  reasonable  certainty  be  able  to  ascer- 
tain the  conditions  under  which  these  contracts  are  to  be 
performed. 

2 — Whether  the  Contract  Price  is  Sufficiently  High  to  En- 
able the  Contractor  to  Make  a  Profit. — If  the  contractor  can 
make  a  profit,  it  is  reasonable  to  suppose  that  he  will  be 
able  to  complete  his  work.  To  ascertain  this,  information 
regarding  the  architect's  estimate,  the  applicant's  bid,  and 
the  figures  of  all  the  other  bidders  on  the  contract  should 
be  considered.  This  latter  information  is  sometimes  difficult 
and  annoying  for  the  agent  to  obtain;  yet  it  is  necessary, 
for,  when  these  figures  are  taken  into  consideration  with 
the  estimate  of  the  architect  or  engineer,  a  fair  idea 
can  be  formed  as  to  whether  the  contractor  has  bid 
high  enough  to  make  a  reasonable  profit.  When  there  is  a 
decided  difference  in  the  estimates  of  the  bidders  on  any 
contract,  particular  attention  should  be  given  to  this  feature, 
and  the  surety  company  should  make  such  an  investigation 
as  to  convince  the  underwriter  that  the  work  can  be  com- 
pleted at  the  contractor's  figures.  Knowledge  of  the  respon- 
sibility and  standing  of  the  other  bidders  must  be  secured  to 
ascertain  whether  they  be  "  straw  "  or  "  legitimate." 

3 — The  Ability  of  the  Contractor  to  Complete  the  Contract. 
— Care  should  be  taken  that  the  contractor  is  bidding  on  a 
character  of  work  with  which  he  is  familiar,  to  make  sure 
that  he  will  be  thoroughly  aware  of  the  conditions  sur- 
rounding it.  If  he  be  bidding  on  a  contract  different  from 
his  general  line  of  operation,  or  if  he  is  agreeing  to  perform 
work  out  of  his  vicinity  (there  being  some  danger  as  to  his 
not  being  familiar  with  the  local  conditions  of  the  place 
where  the  contract  is  to  be  performed),  great  care  should  be 
used  in  scrutinizing  the  risk. 

Bonds  covering  contracts  which  will  take  over  a  year  or 
eighteen  months  to  complete  are  more  hazardous  than  those 

50 


FIDELITY  INSURANCE   AND  CORPORATE   SURETYSHIP 

covering  contracts  of  a  shorter  period,  as  conditions  may 
change  between  the  date  of  the  assumption  of  the  contract 
and  its  completion.  A  list  of  completed  contracts  should 
be  submitted  with  the  application  to  show  the  character  of 
the  contractor's  previous  work.  His  integrity  and  ability  can 
be  learned  from  the  owners,  architects  or  engineers  under 
whom  he  has  previously  worked,  as  well  as  from  the  firms 
furnishing  the  supplies  and  materials.  The  general  reputation 
and  credit  of  the  bidder  should  be  carefully  considered. 

4 — The  Amount  of  Work  Underway  and  Percentage  Un- 
completed.— This  information  is  of  importance,  and  must  be 
taken  into  consideration  with  the  financial  standing  of  the 
contractor.  A  list  of  the  contractor's  undertakings,  show- 
ing the  various  contract  prices,  and  the  percentage  of 
uncompleted  work  in  each,  should  be  ascertained.  This 
will  show  (with  the  contract  in  hand  which  the  bond 
applied  for  is  to  guarantee)  whether  the  contractor  has 
more  work  on  hand  than  his  capital  will  warrant.  One 
of  the  main  reasons  why  contractors  become  embarrassed 
is  because  they  undertake  more  work  than  they  can  satis- 
factorily supervise  and  finance.  If  corporate  surety  has 
been  furnished  by  another  company  on  his  unfinished  work, 
it  should  be  learned  whether  the  risk  in  question  has 
been  declined,  and  a  good  reason  should  be  given  for  the 
"  switching "  of  his  business ;  for  statistics  prove  that  when 
a  contractor  over- trades,  it  becomes  a  question  of  "  robbing 
Peter  to  pay  Paul."  As  a  rule,  when  there  is  any  lack  of 
funds,  the  latest  contract  is  the  one  which  goes  by  default. 
Therefore,  a  thorough  investigation  along  these  lines  should  be 
made  when  underwriting  a  bond,  especially  in  the  case  of 
a  new  client. 

5 — The  Conditions  Under  Which  Payments  are  Made. — It  is 
important  to  determine  how  and  with  what  frequency  pay- 
ments on  the  contract  are  to  be  made.  It  is  an  advantage  to 
have  a  certain  percentage  of  the  contract  price  retained  by  the 

51 


FIDELITY   INSURANCE   AND  CORPORATE  SURETYSHIP 

owner  or  assured,  which  is  usually  from  ten  to  fifteen  per 
cent,  in  order  to  enable  the  company  to  relet  the  contract 
without  loss  in  case  of  default.  It  may  be  stated,  however, 
that  if  the  amount  held  back  is  too  high,  and  the  bid  on  the 
contract  is  at  cost  or  with  a  small  profit  (especially  if  the 
contractor's  available  assets  are  limited  when  compared  with 
the  total  amount  of  work  uncompleted ) ,  a  default  may  result. 
Under  no  conditions  should  a  Contract  Constructural  Bond 
be  considered  when  a  contractor  agrees  to  accept  as  part  pay- 
ment either  bonds  or  securities  unless  some  definite  arrange- 
ment is  made  for  their  discounting;  because  the  contractor 
may  have  difficulty  in  the  selling  or  hypothecation  of  the 
same  and  thereby  become  financially  embarrassed,  in  which 
event  the  surety  company  may  be  compelled  to  discount  them 
for  him  at  a  loss. 

6 — The  Financial  Standing  of  the  Contractor. — A  detailed 
statement  of  the  contractor's  financial  condition  should  be  se- 
cured, and  this  should  be  verified  as  to  bank  balance,  value 
placed  on  stocks  and  bonds,  stock  of  supplies,  notes  and 
accounts  receivable,  and  real  estate  (with  particular  reference 
as  to  whether  the  real  estate  so  itemized  stands  in  the  con- 
tractor's name  and  is  therefore  available  for  the  payment 
of  his  debts ) .  Such  further  information  is  necessary  as  will 
determine  the  integrity  of  the  contractor,  and  whether  his 
statement  is  honest  and  conservative.  In  determining  the 
net  amount  of  assets,  it  is  usually  necessary  to  make  some 
allowance  for  the  depreciation  of  real  estate  together  with 
his  plant  and  bills  receivable  in  order  to  arrive  at  his  net 
worth. 

If  the  contractor  has  protected  himself  in  the  following 
manner  against  contingencies,  it  will  reflect  upon  his  financial 
worth  and  ability: 

a — That  he  carries  a  sufficient  amount  of  life  insurance 
payable  to  his  estate  to  enable  his  executors  to  com- 
plete his  contracts  in  case  of  death; 

52 


FIDELITY    INSURANCE    AND   CORPORATE   SURETYSHIP 

b — That  he  carries  a  sufficient  amount  of  liability  insur- 
ance to  prevent  shrinkage  of  his  funds  or  Ms  credit 
with  his  bank  and  supply  firms  in  case  of  suit  on  the 
part  of  any  workman  injured  by  accident; 

c — That  he  carries  a  sufficient  amount  of  builders'  risk 
insurance  to  protect  him  against  any  suit  by  the  pub- 
lic; and, 

d — That  the  contractor  is  not  an  endorser  for  others. 

The  reader's  attention  is  directed  to  what  may  be  called 
the  "  guess  work  "  statements  frequently  made  by  contractors, 
who  either  do  not  keep  such  a  set  of  books  as  will  give  the 
correct  detailed  statement  of  the  facts  desired,  or  who  are 
not  acquainted  with  their  own  financial  condition  except  in 
"  round  figures."  Such  a  person  does  not  make  a  desirable 
risk. 

In  placing  the  valuation  on  the  plant  of  a  contractor,  a 
determination  should  be  made  not  only  as  to  whether  the 
same  is  in  good  repair,  but  also  and  more  especially  that  the 
kind  and  character  of  the  machinery  needed  for  the  work  in 
question  is  owned.  A  plant  that  can  be  used  is  a  very  im- 
portant asset  but  when  it  is  either  antiquated  or  unsuitable 
for  the  work  in  hand,  it  is  of  very  little  value.  Due  con- 
sideration of  this  fact  should  be  given  in  determining  the 
net  assets  of  a  contractor,  for  many  contractors  have  become 
embarrassed  financially  on  account  of  their  being  obliged  un- 
expectedly, after  they  have  taken  a  contract,  to  make  neces- 
sary additions  to  their  plant. 

7 — Age  of  Contractor. — The  age  of  the  contractor  reflects 
upon  the  desirability  of  the  risk,  for,  if  he  be  too  young,  he 
may  lack  financial  and  executive  experience;  while,  on  the 
other  hand,  if  advanced  in  years,  there  is  a  possibility  of  his 
becoming  physically  disabled  and  for  that  reason  unable  per- 
sonally to  supervise  his  work.  For  this  reason,  other  things 
being  equal,  a  partnership  is  a  better  risk  than  an  individual, 
a  corporation,  than  a  partnership. 

53 


FIDELITY    INSURANCE    AND    CORPORATE   SURETYSHIP 
PREMIUM    RATE    AND    INDEMNITY    AGREEMENT. 

Indemnity  Agreement. — The  premium  rate  on  Contract 
Constructural  Bonds  should  be  charged  on  the  contract 
price  and  not  figured  on  the  penalty  of  the  bond.  It 
should  be  made  payable  per  annum,  though  sometimes  the 
full  premium  is  paid  for  the  term  of  the  bond  in  advance. 
Endless  annoyance  in  the  collection  of  the  second  and  subse- 
quent years'  premiums  on  this  class  of  risks  will  be  saved  a 
field  representative  if  care  be  taken  to  see  that  the  premium 
is  stated  distinctly  in  the  Indemnity  Agreement.  (See  page 
206.) 

The  contractors  also  agrees  in  the  Indemnity  Agreement  to 
furnish  the  company  with  legal  evidence  of  the  completion 
or  release  under  the  bond;  to  reimburse  the  company  for  all 
loss,  costs,  damages,  counsel  fees,  etc.,  that  the  company  may 
sustain  for  having  executed  the  bond;  and  furthermore  that 
the  surety  shall  have  the  right  of  possession  of  such  plant 
of  the  contractor  as  may  be  upon  the  work  in  case  of  default. 
The  surety,  in  other  words,  is  to  be  subrogated  to  all  the 
rights  of  the  contractor  under  the  contract  in  case  of  breach 
or  default.  Great  care  should  be  taken  in  seeing  that  the 
Indemnity  Agreement  is  properly  witnessed  and  legally  exe- 
cuted so  as  to  make  this  instrument  enforcible  in  law  if 
necessary. 

RATIO   OBSERVED    IN   EXECUTING    THESE    BONDS. 

If,  after  reviewing  the  facts,  as  brought  out  on  in- 
quiry, nothing  detrimental  has  been  discovered,  it  is  cus- 
tomary to  execute  Contract  Constructural  Bonds  in  a 
ratio  of  five  to  one,  i.e., — when  the  total  amount  of  the 
uncompleted  portions  of  the  unfinished  contracts  together 
with  the  contract  for  which  the  bond  under  considera- 
tion is  desired  is  not  greater  than  five  times  the  net  or 
available  assets  of  the  contractor.  This  rule,  however,  is 
not  iron-clad,  varying  according  to  the  hazards  of  the  classes  of 

54 


FIDELITY   INSURANCE    AND    CORPORATE   SURETYSHIP 

work  and  according  to  where  and  for  whom  the  work  is  to 
be  done.  The  laws  governing  the  filing  of  mechanics  and 
material  liens  differ  in  the  various  states.  Accordingly,  the 
effect  that  they  may  have  on  the  liability  under  the  bond  is 
reflected  in  the  above  ratio. 

This  ratio  does  not  apply  in  the  execution  of  bonds  running 
to  the  United  States  government,  for  there  is  much  more 
hazard  in  these  undertakings,  in  view  of  the  mode  in  which 
the  work  is  conducted  and  the  bond  form  required. 

FORMS  OF   BONDS   ISSUED. 

The  Contract  Constructural  Bond  forms  issued  by  all  com- 
panies are  practically  similar,  though  it  is  not  always  pos- 
sible to  use  a  company's  own  printed  form,  especially  in  case 
the  bond  is  in  favor  of  the  Federal  or  State  Government,  a 
county  or  municipality.  Where  such  is  not  the  case,  the  form 
ought  to  include,  in  addition  to  the  usual  bond  clauses,  the 
following  conditions  which  should  be  made  precedent  to  the 
rights  of  the  assured  to  recover  under  the  bond. 
1 — A  provision  for  notice. 

2 — Giving  the  surety  the  option  to  complete  in  case  of 
default  and  to  be  subrogated  to  the  rights  and  bene- 
fits of  its  principal. 

3 — Limiting  the  surety's  liability  to  the  assured. 
4 — Relating  to  the  time  when  last  payment  and  reserve 

shall  be  made. 

5 — Excluding  certain  contingencies  from  the  surety's  lia- 
bilities over  which  no  one  has  control. 
6 — That  notice  and  consent  must  be  given  of  changes  and 

alterations. 
7 — That  the  bond  does  not  guarantee  proficiency,  wearing 

qualities  or  maintenance. 

8 — A  provision  relating  to  counter  security,  or  propor- 
tionate loss  clause. 

9 — Limiting  time  for  legal  action  and  the  amount  pay- 
able under  the  bond. 

55 


FIDELITY   INSURANCE   AND   CORPORATE   SURETYSHIP 

All  of  these  provisions  are  necessary  to  the  surety's  interest 
and  are  likewise  for  the  protection  of  the  assured,  as  they 
set  forth  the  exact  conditions  under  which  the  surety  has 
executed  the  bond,  and  is  willing  to  assume  the  liability. 
No  injury  will  result  to  the  assured  if  he  adheres  strictly 
to  these  conditions. 

Bonds  issued  in  favor  of  the  Federal  and  State  Govern- 
ments, counties  or  municipalities  are  to  all  appearances 
broader  in  their  scope,  for  the  reason  that  many,  if  not  all, 
of  the  above  noted  provisions  are  eliminated.  When  the  as- 
sured, however,  as  would  be  likely  in  these  cases,  has  a  legal 
department  to  pass  on  the  form  and  to  look  after  its  rights 
as  well  as  its  duties  to  the  surety  (which  rights  are  firmly 
established  in  law  and  equity),  it  is  not  necessary  for  these 
conditions  to  be  set  out  specifically.  In  view  of  the  fact  that 
many  Contract  Constructural  Bonds  run  to  laymen,  who,  as 
a  rule,  do  not  consult  attorneys  until  they  become  involved 
in  some  way,  it  is  the  practice  for  surety  companies  to  set 
out  clearly  and  specifically  the  necessary  conditions  for  the 
benefit  of  such  clients. 

ANALYSIS  OF  THE  GENERAL  PROVISIONS.* 
A  fair  sample  of  the  form  of  Contract  Constructural  Bonds 
generally  in  use  will  be  indicated  by  the  following  analysis. 
In  addition  to  this  a   second   form,   which  differs  somewhat 
from  the  first,  is  also  discussed. 

1 — PROVISION   OF   NOTICE. 

"The  said  Surety  shall  be  notified  in  writing  of  any  act 
on  the  part  of  said  Principal  or  its  agents  or  employees  which 
may  involve  a  loss  for  which  the  said  Surety  is  responsible 
here  under,  immediately  after  the  occurrence  of  such  act  shall 
have  come  to  the  knowledge  of  said  Obligee  or  to  any  repre- 
sentative duly  authorized  by  him  to  oversee  the  performance 
of  said  contract;  and  a  registered  letter  mailed  to  the  Presi- 
dent of  said  Surety  .at  its  office  in  City  State, 

shall  be  the  notice  required  within  the  meaning  of  this  bond." 

*  See  sample  forms,  Appendix,  pages  207-210. 
56 


FIDELITY  INSURANCE   AND  CORPORATE    SURETYSHIP. 

The  surety  is  certainly  entitled  to  notice  of  any  default 
whether  material  or  otherwise  on  the  part  of  its  principal, 
whether  such  default  may  or  may  not  result  in  pecuniary 
loss.  This  right  is  founded  upon  a  plain  principle  of  justice, 
for  the  owner,  or  his  agent,  the  architect,  being  in  constant 
attendance  upon  the  work,  and,  therefore,  in  a  position  to 
observe  any  breach  of  contract  on  the  part  of  the  contractor, 
should  immediately  notify  the  surety,  who  has  obligated  itself 
to  indemnify  the  owner  against  wrongful  acts  on  the  part  of 
the  contractor.  It  would  not  be  equitable  if  the  owner  should 
be  permitted  to  remain  silent  until  the  work  was  completed, 
and  then  make  claim  on  the  bond  for  default  under  the  con- 
tract, which  could  not  be  remedied  except  at  great  expense. 
If  proper  notice  is  not  given,  therefore,  in  a  bond  having  this 
clause,  such  failure  constitutes  a  breach  of  contract  on  the 
part  of  the  assured  with  the  surety,  and  may  defeat  the  as- 
sured's  claim,  if  he  has  any.  The  object  of  this  notice  is  that 
the  surety  may  be  apprized  of  any  claim  that  is  likely  to  be 
made  against  it,  in  order  that  efforts  may  be  made  to  bring 
about  an  adjustment  of  existing  differences  between  the  as- 
sured and  the  principal.  This  prevents  the  necessary  expense 
which  might  be  entailed  if  the  difficulty  were  permitted  to 
drift  until  a  crisis  was  reached,  as  it  frequently  happens  that 
the  surety,  being  a  middle  man,  so  to  speak,  is  able  to  bring 
the  parties  together  and  act  in  the  capacity  of  an  arbitrator. 

2 — GIVING   THE   SURETY  OPTION   TO   COMPLETE. 

"  If  the  said  principal  shall  voluntarily  abandon  said  con- 
tract, or  be  lawfully  compelled  by  the  Obligee  to  cease  opera- 
tions thereunder  by  reason  of  its  non-performance  of  any  of 
the  terms  or  conditions,  then  the  Surety  shall  have  the  right, 
in  its  option,  to  assume  the  said  contract  and  to  sublet  or 
complete  the  same,  and  if  said  contract  shall  be  assumed  by 
the  Surety,  then  as  such  contract  is  duly  performed,  any 
reserve,  deferred  payments,  and  all  other  moneys  provided 
by  said  contract  to  be  paid  to  the  Principal  'shall  be  paid  to 
the  Surety  at  the  same  time  and  under  the  same  conditions 
as  by  the  terms  thereof,  such  moneys  would  have  been  paid 

57 


FIDELITY  INSURANCE  AND  CORPORATE   SURETYSHIP. 

to  the  Principal  had  the  contract  been  duly  performed  by  it. 
And  if  said  Obligee  shall  complete  or  relet  the  said  contract, 
then  any  forfeitures  provided  in  said  contract  against  the 
Principal  shall  not  be  operative  as  against  the  Surety,  but 
all  reserves,  deferred  payments  and  all  other  moneys  pro- 
vided in  said  contract  which  would  have  been  paid  to  the 
Principal  had  it  completed  the  contract  in  accordance  with  the 
terms,  shall  be  credited  upon  any  claim  the  said  Obligee  may 
make  upon  said  Surety." 

A  clause  containing  the  above  conditions  should  be  inserted 
in  order  that  the  surety  may  have  an  opportunity  to  work 
out  a  contract  proposition  without  loss,  or  at  any  rate  to 
minimize  the  loss  as  much  as  possible  in  case  a  default  occurs. 
Were  this  clause  not  inserted,  the  assured  might  disregard 
entirely  the  rights  of  the  surety,  and  undertake  the  comple- 
tion of  the  contract  himself.  If,  after  completion,  it  devel- 
oped that  more  money  had  been  expended  than  named  in  the 
original  contract,  he  might  make  a  demand  on  the  surety  for 
the  difference. 

The  subrogation  clause  is  not  absolutely  essential  for  the 
reason  that  the  surety  has  this  right  by  reason  of  its  rela- 
tionship to  the  parties  at  interest.  The  right  of  subrogation 
is  a  principle  of  equity,  and  is  also  recognized  and  enforced 
in  courts  of  law.  It  is  not  founded  on  the  contract  or  agree- 
ment, but  upon  plain  principles  of  common  justice.  It  has 
its  origin  in  a  sense  of  natural  right,  and  is  controlled  by 
equitable  principles.  It  is  not  a  thing  which  must  be  alleged 
to  entitle  the  surety  to  its  benefits,  but  is  the  conclusion  of 
law  and  equity  drawn  by  the  courts  from  the  statement  of 
facts  out  of  which  it  arises.  'In  view  of  the  court  recognizing 
the  surety's  rights  of  subrogation,  this  clause  is  inserted  in  the 
bond  for  the  protection  of  the  assured  rather  than  the  pro- 
tection of  the  surety. 

3 — LIMITING    THE    SURETY'S    LIABILITY    TO    THE    ASSURED. 

"  The  Surety  shall  not  be  liable  under  this  bond  to  any  one 
except  the  Obligee,  but  it  is  agreed  that  the  Obligee  in  esti- 

58 


FIDELITY   INSURANCE   AND   CORPORATE    SURETYSHIP. 

mating  his  damage,  may  include  the  claims  of  mechanics  and 
material  men,  arising  out  of  the  performance  of  the  contract, 
and  paid  by  him  only  when  the  same,  by  the  Statutes  of  the 
State  where  the  contract  is  to  be  performed,  are  valid  liens 
against  his  property." 

This  clause  is  inserted  in  order  to  prevent  mechanics  and 
material  men  from  proceeding  against  the  surety  direct,  which 
right  is  given  them  under  the  forms  of  bond  prescribed  by 
the  United  States  Government  and  by  the  statutes  of  some 
of  the  states.  Though  this  clause  is  for  the  benefit  of  the 
surety  it  does  not  deprive  the  assured  of  any  of  his  rights, 
or  in  any  way  affect  his  interests.  The  only  obligation  im- 
posed upon  him  is  that  he  must  be  positive  when  he  settles 
any  claims  that  they  are  of  a  lienable  character. 

4 — TIME    WHEN    THE    LAST    PAYMENT    AND    RESERVE    SHALL    BE 

MADE.  , 

"  The  said  Obligee  shall  retain  the  last  payment  and  reserve 
due  said  Principal  until  the  complete  performance  by  said 
Principal  of  all  the  terms,  covenants  and  conditions  of  the 
contract  on  said  Principal's  part  to  be  performed  and  until 
the  expiration  of  the  time  within  which  liens  or  notices  of 
liens  may  be  filed,  by  reason  of  anything  done  in  or  towards 
the  performance  of  said  contract,  and  until  the  cancellation 
and  discharge  of  such  liens,  if  any,  and  said  Surety  shall  be 
notified  in  writing  before  said  last  payment  shall  be  made  or 
said  reserve  paid." 

This  clause  is  of  more  or  less  benefit  to  the  surety,  and  the 
obligations  which  it  imposes  are  not  of  an  onerous  character. 
In  answer  to  any  possible  contention  that  this  provision  may 
seem  not  entirely  reasonable  or  fair  to  the  assured,  it  should 
be  pointed  out,  and  is  obvious  upon  proper  consideration,  that 
it  is  to  a  certain  extent  to  his  interest  and  advantage;  for,  if 
the  last  payment  and  reserve  is  retained  until  the  expiration 
of  the  lien  period,  or  the  consent  of  the  surety  for  payment 
is  had,  if  payment  be  made  before  such  period,  in  all  proba- 
bility considerable  annoyance  in  the  way  of  claims  and  threats 

59 


FIDELITY  INSURANCE  AND  CORPORATE   SURETYSHIP. 

to  proceed  against  the  property  will  be  saved  the  assured. 
This  clause  only  requires  the  assured  to  act  as  a  prudent  man 
would,  had  he  no  security  such  as  the  bond  furnishes. 

5 — EXCLUDING     CERTAIN     CONTINGENCIES     FROM     THE     SURETY'S 
LIABILITY. 

"  The  Surety  shall  not  be  liable  for  any  damage  resulting 
from  an  Act  of  God,  or  from  mob,  riot,  civil  commotion  or 
a  public  enemy,  or  from  so-called  strikes  or  labor  difficulties, 
or  from  fire,  lightning,  tornadoes  or  cyclone,  and  the  Surety 
shall  not  be  liable  for  the  re-construction  or  repair  of  any 
work  or  materials  damaged  or  destroyed  by  said  causes  or 
any  of  them." 

A  Surety  Bond  is  not  given  to  guarantee  faithful  perform- 
ance of  a  contract  when  certain  circumstances  may  develop 
over  which  neither  the  surety  nor  the  contractor  has  any 
control.  The  bond  is  for  one  purpose  only;  i.  e.,  to  guarantee 
the  good  faith  and  conduct  of  the  contractor  under  certain 
circumstances.  It  is  not  intended  to  furnish  any  other  form 
of  insurance.  Many  of  the  contingencies  exempted  by  this 
clause  may  be  covered  by  other  forms  of  insurance,  and  it 
places  the  burden  upon  the  assured  to  see  that  he  ^protects 
his  interests  from  such  unforeseen  circumstances. 

6 — NOTICE  AND  CONSENT  TO  CHANGES   AND  ALTERATIONS. 

"  The  Surety  must  be  notified  in  writing  and  its  written 
consent  secured  to  any  change  or  alterations  made  in  the 
original  plans  or  specifications  by  the  Obligee." 

This  clause  requiring  the  surety  to  be  served  with  notice 
of  any  changes  or  alterations  in  the  original  plans  or  speci- 
fications is  not  only  reasonable,  but  most  important  from 
the  surety's  standpoint,  as  the  question  of  the  amount  of 
premium  is  more  or  less  involved.  Even  though  this  clause 
were  not  inserted,  any  alteration  or  change  without  the  con- 
sent of  the  surety  would  vitiate  the  surety's  obligation  to  the 
assured,  as  it  is  a  well  determined  fact  that  courts  will 

60 


FIDELITY   INSURANCE   AND   CORPORATE    SURETYSHIP. 

not  countenance  one  or  more  parties  disregarding  any  terms 
of  a  written  contract  without  the  consent  of  all.  This  pro- 
vision, therefore,  is  for  the  protection  of  the  assured  as  well 
as  the  surety. 

7 — BOND    DOES    NOT    GUARANTEE    PROFICIENCY,    WEARING    QUALI- 
TIES OR  MAINTENANCE. 

"This  bond  does  not  cover  any  provisions  of  the  contract 
or  specifications  respecting  guarantees  of  efficiency  or  wear- 
ing qualities  or  for  maintenance  or  repairs,  nor  does  it 
obligate  the  Surety  to  furnish  any  other  bond  covering  such 
provisions  of  the  contract  or  specifications." 

This  clause  should  be  inserted  to  prevent  any  misappre- 
hension in  the  mind  of  the  assured  that  the  bond  is  given  for 
more  than  simply  the  constructural  part  of  the  contract. 
Where  guarantee  of  efficiency  or  maintenance  is  desired,  a 
separate  bond  should  be  given  or  a  special  clause  inserted 
stating  fully  the  conditions  under  which  such  guarantee  and 
maintenance  is  undertaken  or  exacted.  This  is  of  mutual 
benefit  to  both  the  assured  and  the  surety. 

8 — COUNTY- SECURITY   OR  PROPORTIONATE   LOSS    CLAUSE. 

"That  if  the  Obligee  shall  at  any  time  hold  concurrently 
with  this  bond  or  represent  to  the  Surety  in  any  statement 
or  declaration  to  it,  that,  said  Obligee  does  or  will  at  any 
time  hold  concurrently  with  this  bond  any  other  bond  or 
guarantee  of  security  received  in  connection  with  the  con- 
tract covered  by  the  above  bond,  the  Obligee  shall  be  en- 
titled, in  the  event  of  loss  as  hereinbefore  stated,  to  claim 
hereunder  only  such  proportion  of  the  loss  as  the  amount 
covered  by  this  bond  bears  to  the  whole  amount  of  the 
security  carried,  or  so  stated  to  be  carried,  covering  the 
contract  covered  by  the  above  bond,  whether  the  Obligee 
shall  be  able  to  reimburse  himself  from  such  other  bonds 
of  guarantee  so  carried  or  stated  to  be  carried  or  not,  or 
whether  the  same  has  been  allowed  to  lapse  or  not." 

This  provision  is  inserted  for  the  protection  or  guidance  of 
the  assured,  as  any  rights  which  are  intended  to  be  reserved 

61 


FIDELITY   INSURANCE   AND   CORPORATE    SURETYSHIP. 

in  favor  of  the  surety  thereby  are  recognized  by  the  courts. 
The  position  is  also  founded  on  principles  of  natural  justice. 

9 — LIMITING    TIME    FOR    LEGAL   ACTION. 

"  That  any  suits  at  law  or  proceedings  in  equity  on  this 
bond  to  recover  any  claim  hereunder  must  be  instituted  within 
six  months  after  the  first  breach  of  said  contract.  The 
surety  shall  not  be  liable  for  an  amount  in  excess  of  the 
penalty  of  this  bond." 

or 

"That  any  suits  at  law  or  proceedings  in  equity  on  this 
bond  to  recover  any  claim  hereunder  must  be  instituted  be- 
fore the day  of .  The  surety  shall  not  be  liable 

for  an  amount  in  excess  of  the  penalty  of  this  bond." 

The  effect  of  these  clauses  is  to  enable  the  surety  to  cancel 
its  liability  after  it  has  given  the  assured  a  reasonable  time 
in  which  to  take  legal  action  under  a  breach  of  the  contract. 
The  clause  should  also  be  so  drawn  that  the  surety  will  not 
be  liable  for  an  amount  in  excess  of  the  penalty  of  the  bond. 

SECOND    FORM    OF    BOND.* 

The  other  or  second  form  of  Contract  Constructural  Bond, 
which  is  more  or  less  used,  is  rather  in  the  nature  of  an 
Indemnifying  Bond  than  a  Specific  Performance  Bond.  It 
contains,  in  addition,  substantially  all  of  the  bond  provisions 
hereinbefore  recited  in  a  more  or  less  condensed  form. 

In  the  first  form  of  bond  from  which  the  above  provisions  are 
quoted  and  enlarged  upon,  the  condition  is  that  if  the  prin- 
cipal (meaning  the  contractor)  shall  faithfully  perform  said 
contract  according  to  the  terms,  covenants  and  conditions 
thereof,  then  the  obligation  is  to  be  void,  whereas,  in  the 
second  form  the  condition  is  "  that  if  the  principal  shall 
indemnify  the  obligee  (meaning  the  owner)  against  any  loss 
or  damage  directly  arising  by  reason  of  the  failure  of  the 
principal  to  faithfully  perform  said  contract,  then  the  obliga- 


*  See  Appendix,  pages  207-210. 
62 


FIDELITY   INSURANCE   AND   CORPORATE    SURETYSHIP. 

tion  to  be  void.  The  second  form  also  contains  the  same 
"  Provision  of  Notice  "  as  the  first,  with  the  exception  that  the 
owner  is  required  to  furnish  within  ten  days  a  written  state- 
ment of  the  defaults  of  the  contractor  with  the  date  of  the 
same,  after  the  owner  or  his  representative,  or  the  architect, 
if  any,  shall  learn  of  such  default.  The  surety,  however,  is 
obliged  within  a  specified  time  after  the  receipt  of  such  notice 
to  secure  others  to  proceed  with  the  performance  of  the  con- 
tract in  the  event  it  is  disposed  to  do  so.  Provision  is 
made  in  the  latter  obligation  for  limiting  the  time  within 
which  the  owner  may  proceed  against  the  principal  or  surety 
to  a  specified  date,  whereas  in  the  first  form,  the  rights  of 
the  owner  are  limited  under  the  bond  to  six  months  after  the 
first  breach  of  the  contract.  In  the  second  form  there  is  a 
provision  that  the  contractor  be  made  a  party  to  any  such 
suit  or  action  and  be  served  with  process  if  he  can  be 
found.  The  second  form  limits  the  damages  which  the 
owner  can  claim  against  the  surety  by  reason  of  delays  in 
finishing  the  contract,  and  this  limitation  is  based  upon  a 
certain  percentage  of  the  penalty  of  the  bond.  The  relative 
clauses  of  the  two  forms  respecting  the  retention  of  a  pro- 
portion of  the  contract  price  until  the  completion  of  the  con- 
tract are  somewhat  different — the  second  form,  it  is  to  be 
noted,  requires  the  owner  to  retain  a  certain  definite  per- 
centage, which  is  inserted  in  the  body  of  the  bond.  The 
latter  form,  furthermore,  contains  a  guarantee  on  the  part 
of  the  owner  that  the  plans  and  specifications  mentioned  in 
the  contract,  which  is  guaranteed  thereby,  are  not  in  any  re- 
spect defective,  and  will  at  all  times  be  adequate  for  the 
complete  performance  thereof.  This  is  a  just  and  reasonable 
provision  and  equally  as  protective  to  the  owner  as  the 
surety. 

In  discussing  the  first  form  of  bond,  it  was  noted  that  it 
contained  a  provision  requiring  notice  to  be  given  to  the 
surety  of  any  change  or  alterations  in  the  original  plans  and 
specifications.  The  second  form  contains  a  similar  pro- 

63 


FIDELITY   INSURANCE   AND   CORPORATE    SURETYSHIP. 

vision  with  the  exception  that  it  allows  the  owner  to 
make  changes,  provided  such  changes  do  not  increase  the 
contract  price  beyond  a  certain  percentage  of  the  penalty  of 
the  bond,  which  is  definitely  stipulated  therein.  The  owner 
is  thereby  allowed  a  considerable  freedom,  and,  as  long  as  he 
does  not  violate  the  provisions  of  the  bond  in  this  regard, 
he  need  have  no  fear  of  a  denial  of  liability  on  the  part  of 
the  surety  by  reason  of  slight  and  immaterial  changes  in 
the  plans  and  specifications. 

Finally,  the  second  form  contains  a  provision  which  con- 
fines the  surety's  liability  to  the  use  and  benefit  of  the  owner 
named  in  the  bond.  It  also  provides  that  the  obligation  of 
the  surety  shall  be  construed  strictly  as  one  of  suretyship, 
and  shall  not,  for  any  interest  therein,  or  right  or  action 
thereon,  be  assigned  without  the  prior  consent  in  writing 
of  the  surety. 

CANCELLATION  OR  RELEASE. 

It  is  desirable  to  emphasize  to  field  men  accustomed  to 
handle  other  lines  of  insurance  that  there  is  no  cancellation 
clause  in  a  Contract  Constructural  Bond  similar  to  that  in 
the  usual  insurance  policies.  Such  being  the  case,  the  old 
saying,  "  Be  sure  that  you  are  right  and  then  go  ahead,"  par- 
ticularly applies  to  a  bond  of  this  class,  as  the  liability  can- 
not be  terminated  at  any  fixed  date,  but  only  upon  the  com- 
pletion of  the  obligation  involved. 

It  is  necessary  for  the  surety  company,  in  order  to  cancel 
the  liability,  to  secure  a  legal  release  and  thereby  reduce 
its  premium  reserve  as  carried  against  such  risks.  This  can 
best  be  secured  by  the  agent,  and  he,  at  the  proper  time,  should 
get  from  the  owner  or  assured  under  the  bond  a  statement 
that  the  work  has  been  completed  and  accepted,  which  should 
be  in  writing  and  promptly  forwarded  to  the  home  office  of 
the  company. 

In  order  that  this  phase  of  this  branch  of  the  surety  busi- 
ness may  be  better  understood  by  the  field  men,  it  can  be 

64 


FIDELITY  INSURANCE   AND   CORPORATE    SURETYSHIP. 

briefly  stated  that  there  are  six  methods  by  which  a  Contract 
Constructural  Bond  may  be  cancelled: 

1 — By  surrender  of  the  obligation. 

2 — Release  in  writing. 

3 — By  the  operation  of  the  statutes  of  limitation. 

4 — By  agreement  of  the  parties. 

5 — A  breach  in  the  bond  on  the  part  of  the  assured. 

6 — By  settlement  of  claim. 

The  first  three  conditions  apply  when  the  obligation  has 
been  fulfilled,  in  which  case  the  bond  should  be  returned  to 
complete  the  files  of  the  surety.  In  case,  however,  the  as- 
sured wishes  to  preserve  the  bond  for  his  own  record,  he 
should  execute  a  release  to  the  effect  that  the  obligation  has 
been  fulfilled  and  all  liability  on  the  part  of  the  surety 
terminated.  When  neither  of  these  can  be  obtained,  then 
the  surety's  liability  can  only  be  terminated  by  operation 
of  the  statutes  of  limitations. 

The  method  as  stated  in  (4)  is  applied  in  case  the  obliga- 
tion has  been  indefinitely  suspended  by  agreement  of  the 
parties,  or  when  the  assured  is  unable  to  continue  the  financ- 
ing of  the  contract  and  settles  with  the  contractor  for  the 
work  done  to  date,  thereby  suspending  operations  indefinitely. 
The  surety  company  should  be  furnished  with  a  copy  of  such 
agreement. 

The  fifth  method  of  cancellation  is  applicable  when  the 
assured  vitiates  the  obligation  of  the  surety  by  some  act 
contrary  to  the  agreement  between  them.  This  agreement 
may  either  be  in  the  bond  itself  or  may  be  evidenced  by  a 
separate  instrument.  In  order  however  to  make  void  the 
bond  on  the  strength  of  the  violation  of  a  separate  instru- 
ment, it  is  necessary  that  it  be  stated  that  the  terms  of 
such  instrument  are  made  a  part  of  the  bond,  not 
only  by  reference  thereto,  but  by  stipulation  in  the  bond  that 
such  instrument  has  been  agreed  upon  by  the  parties  as  a 
part  of  the  bond. 

65 


FIDELITY    INSURANCE   AND   CORPORATE    SURETYSHIP. 

The  procedure  is  not  generally  involved  in  difficulty  when 
a  claim  and  settlement  are  made  under  a  bond.  It  is  cus- 
tomary to  get  a  legal  release  at  the  time  of  such  settlement, 
as  this  relieves  the  company  from  further  liability  under 
the  bond. 


CHAPTER  III. 

MAINTENANCE  BONDS. 

A  Maintenance  Bond  can  either  be  made  one  of  the  clauses 
of  a  Contract  Constructural  Bond,  or  be  issued  as  a  separate 
instrument  to  cover  any  provision  or  terms  of  the  contract 
or  specifications  which  require  guarantee  of  efficiency  or 
wearing  qualities,  maintenance  or  repairs.  Maintenance  pro- 
visions in  a  constructural  contract  are  not  necessarily  objec- 
tionable, provided  they  do  not  cover  deterioration  caused  by" 
the  ordinary  wear  and  tear  of  the  property. 

WHEN  MAINTENANCE   BONDS  ARE  REQUIRED. 

The  following  may  be  given  as  the  usual  conditions  under 
which  these  bonds  are  desired: 

1 — For  Maintaining  an  Ordinary  Building  Against  Defects 
Which  Might  Develop  During  the  Maintenance  Period  (Usu- 
ally One  Year  and  Seldom  Over  Two). — About  the  only  defects 
which  are  likely  to  appear  would  be  in  the  walls  and  ceilings, 
caused  by  the  settling  of  the  building.  These  can  be  easily 
remedied  by  a  slight  touching  up  and  at  small  expense. 

2 — For  Concrete  Construction. — This  is  not  considered  haz- 
ardous if  the  building  be  used  for  ordinary  purposes.  When, 
however,  heavy  machinery,  such  as  printing  presses,  etc., 
which  cause  more  or  less  vibration,  is  to  be  installed  in  the 
building,  great  care  should  be  exercised  before  a  bond  is 
given  to  cover  a  maintenance  period.  There  is  absolutely 
no  way  of  knowing  whether  the  building  will  sustain  shocks 
resulting  from  constant  vibration.  This  form  of  construc- 
tion is  also  used  in  bridges,  and  when  the  work  is  done  in 
a  workmanlike  manner,  and  the  spans  are  not  great,  nor  the 
traffic  unusually  heavy,  they  are  not  undesirable  risks. 

67 


FIDELITY   INSURANCE   AND   CORPORATE    SURETYSHIP. 

3 — For  the  Installation  of  Machinery  and  Heating  Plants. 

4 — For  a  Guarantee  of  Street  Paving. — Such  bonds  should 
not  be  issued  for  a  longer  period  than  five  years,  and  are 
extremely  hazardous  except  on  behalf  of  very  large  contrac- 
tors. Even  then  they  should  not  be  executed  unless  collateral 
is  secured  covering  the  probable  cost  of  maintaining  repairs. 
Bonds  on  streets  where  there  are  car  tracks  are  especially 
hazardous,  as  few,  if  any,  pavements  will  not  deteriorate 
during  a  long  maintenance  term  on  streets  on  which  car 
tracks  are  laid.  It  is  frequently  necessary  to  make  repairs, 
and  for  this  reason  collateral  indemnity  should  be  secured 
or  an  agreement  made  with  the  municipality  that  sufficient 
funds  will  be  retained  until  the  expiration  of  the  maintenance 
period  to  take  care  of  the  repairs. 

6 — For  Tile  Work,  Roofing,  Small  Sewers,  Drains,  Etc. 

NECESSITY  FOR  INVESTIGATION. 

In  passing  upon  the  advisability  of  the  execution  of  a 
Maintenance  Bond,  as  full  an  investigation  should  be  made  as 
in  the  case  of  Contract  Constructural  Bonds,  but  additional 
care  should  be  exercised  in  an  investigation  of  the  contrac- 
tor's previous  experience  with  the  work  to  be  guaranteed. 
His  reputation  should  be  good,  and  it  is  desirable  that  he 
should  have  had  experience  covering  many  years  in  his  par- 
ticular line  of  work.  Investigation  should  also  show  that  his 
previous  work  has  been,  without  exception,  absolutely  satis- 
factory. This  especially  applies  to  contractors  for  the  in- 
stallation of  machinery  and  heating  plants. 

One  of  the  dangers  in  the  execution  of  Maintenance  Bonds 
without  collateral  for  the  protection  of  the  surety,  is  the 
difficulty  of  determining  the  prospect  or  probability  of  the 
contractor's  continuing  in  business,  and  maintaining  his  credit 
to  the  end  of  the  maintenance  period.  Experience  shows  that 
it  is  practically  impossible  for  anyone  to  calculate  with 
accuracy  the  length  of  any  business  concern's  existence.  The 

68 


FIDELITY  INSURANCE   AND  CORPORATE   SURETYSHIP. 

hazard,  therefore,  under  Maintenance  Bonds  is  very  much 
greater  than  in  the  ordinary  Contract  Constructural  Bond. 
This  is  principally  on  account  of  the  time  to  be  covered.  Many 
firms,  who  are  entitled  to  a  bond  for  structural  purposes, 
could  not  secure  a  Maintenance  Bond,  extending  over  any 
considerable  length  of  time,  unless  full  collateral  were  placed 
with  the  surety. 


69 


CHAPTER  IV. 

SUPPLY  BONDS. 

The  term  "  Supply  Bond  "  is  applied  to  those  bonds  which 
guarantee  the  furnishing  of  supplies,  materials,  etc.  When 
these  articles,  however,  are  to  become  part  of  the  realty  or  are 
attached  thereto  during  the  time  of  construction,  the  bond 
should  be  classified  as  a  Contract  Constructural  Bond.  As 
the  articles  to  be  supplied  are  as  a  rule  either  in  a  crude 
or  manufactured  state  and  can  be  purchased  on  the  open 
market,  the  risk  assumed  is  not  as  great  as  under  Contract 
Constructural  Bonds.  The  investigation  of  the  applicant  is 
similar  to  that  required  in  Constructural  contracts.  Special 
care  should  be  taken  not  only  to  see  that  the  figures  of  all 
the  bidders  are  close,  but  that  the  contract  price  of  the  articles 
to  be  supplied  is  near  enough  to  the  general  market  value  to 
enable  the  firm  to  carry  out  the  contract. 

The  risk  or  liability  of  the  surety  on  these  bonds  in 
case  of  default  is  generally  calculated  as  the  difference  be- 
tween the  contract  and  market  price  at  which  the  goods  can 
be  purchased,  except  in  those  cases  where  the  contractor 
agrees  to  supply  a  patented  article.  In  such  an  instance 
care  should  be  taken  to  see  that  contractor  is  able  to  deliver 
the  same,  for,  otherwise,  the  surety  might  find  it  difficult  to 
furnish  the  article  so  patented.  It  is  also  to  be  carefully 
noted  that  the  bond  generally  guarantees  that  the  article  sup- 
plied will  conform,  both  as  to  quantity  and  quality,  with  the 
contract  specifications.  Generally,  Supply  Bonds  are  excel- 
lent risks,  and  are  much  sought  after  by  surety  companies. 

Bonds  of  this  nature  are  required  of  firms  supplying 
material  of  any  kind  to  the  Federal  or  State  Governments 
and  municipalities.  They  are  also  exacted  in  many  instances 

70 


FIDELITY   INSURANCE   AND    CORPORATE    SURETYSHIP. 

by  private  concerns.  Agents  and  solicitors  will  not  find  it 
difficult  to  locate  this  business,  owing  to  the  innumerable 
firms  that  bid  to  furnish  supplies  to  the  various  purchasing 
departments. 

The  form  of  bond  required  guarantees  that  the  surety  will 
hold  the  assured  harmless  in  case  of  default,  provided  the 
assured  is  compelled  to  purchase  the  supplies  in  the  open 
market  at  a  loss. 


71 


CHAPTER  V. 

MISCELLANEOUS  CONTKACT  BONDS. 

Many  of  the  bonds  considered  in  this  chapter,  though  some- 
what similar  to  the  Contract  Constructural  Bonds  previously 
treated,  are  concerned  with  some  peculiar  condition  surround- 
ing a  contract,  which  makes  it  desirable  to  class  them  under 
this  general  heading.  An  attempt  will  not  be  made  to  con- 
sider all  of  the  many  bonds  covering  miscellaneous  contracts, 
but  it  is  advisable  that  attention  be  called  to  those  most  gen- 
erally required.  The  obligations  of  this  class  quite  frequently 
guarantee  contracts  of  a  semi-public  nature.  In  such  cases 
they  are  either  statutory  in  form  or  subject  to  the  approval 
of  some  duly  appointed  legal  advisor. 

The  mode  of  investigating  bonds  under  this  class  is  similar 
to  that  followed  in  other  contract  propositions,  but  as  peculiar 
conditions  often  surround  the  various  contracts,  it  is  neces- 
sary to  look  most  carefully  into  the  terms  of  the  agreement 
itself  to  determine  the  true  liability  on  them,  and  the  bond 
forms  should  be  drawn  accordingly. 

CLASSIFICATION  OF  MISCELLANEOUS  CONTRACT 
BONDS. 

Under  the  head  of  "  Miscellaneous  Contract  Bonds,"  as  dis- 
tinguished from  the  contract  bonds  heretofore  considered  in 
chapters  II,  III,  IV,  those  most  frequently  noticed  are  as 
follows : 

1 — PUBLIC    PRINTING. 

By  legislation  or  appointment,  a  contract  is  usually  given 
for  the  public  printing.  The  person  so  selected  is  required 
to  furnish  a  bond  guaranteeing  the  faithful  fulfillment  of 
the  contract  as  awarded,  the  penalty  of  which  varies  accord- 

72 


FIDELITY   INSURANCE  AND  CORPORATE   SURETYSHIP. 

ing  to  the  estimated  amount  of  work  to  be  done.  This  busi- 
ness is  considered  good  when  the  bid  is  let  to  a  printer  of 
reputable  financial  standing. 

2 — STREET   SPRINKLING. 

It  is  the  custom  for  municipalities  to  sprinkle  their  streets. 
When  this  is  done  by  contract,  the  individual  or  company, 
as  the  case  may  be,  is  required  to  give  bond  and  the  risk  on 
the  same  is  generally  dependent  on  the  kind  or  amount  of 
equipment  owned  by  the  contractor. 

3 — COTTON  COMPRESS  WITH  OR  WITHOUT   FIRE  LIABILITY. 

These  bonds  are  most  frequently  required  by  railroads  and 
large  cotton  factors  throughout  the  South.  They  guarantee 
that  cotton  delivered  to  a  compress  company  will  be  properly 
compressed  and  re- delivered  without  loss  or  damage.  In 
most  instances  they  operate  as  a  full  guarantee  of  the  rail- 
road bill  of  lading  or  compress  company's  receipt,  the  effect 
of  the  guarantee  being  that  the  compress  company  and  its 
surety  are  held  liable,  not  only  for  the  grade  and  condition, 
but  also  for  the  weight  of  the  cotton.  Owing  to  the  peculiar 
conditions  surrounding  this  business  and  the  rapidity  at 
which  the  commodity  runs  into  money,  together  with  the 
ease  of  realizing  on  the  same,  the  liability  can  become  so  large 
that  very  few  compress  companies  are  strong  enough  finan- 
cially to  warrant  the  execution  of  such  bonds. 

4 — FURNISHING  STEAM   PUMPS. 

Bonds  under  this  class  differ  somewhat  from  Supply  Bonds, 
owing  to  the  fact  that  the  contracts  necessarily  contain  many 
special  clauses.  Where  the  bond  is  to  guarantee  that  the 
pump  will  accomplish  a  certain  amount  of  work,  the  hazard 
is  greatly  increased. 

5 — CONSTRUCTION  OF  VESSELS. 

The  principal  business  offered  hereunder  is  in  the  construc- 
tion of  Government  vessels  and  is,  as  is  the  case  with  all 

73 


FIDELITY  INSURANCE  AND   CORPORATE    SURETYSHIP. 

Contract  Constructural  Bonds  running  to  the  United  States 
Government,  considered  more  hazardous  than  similar  obliga- 
tions having  reference  to  individuals.  This  arises  from  the 
technicality  of  the  Federal  officers,  who  usually  supervise  the 
work  and  to  whom  is  given,  as  a  rule,  absolute  authority. 
This  frequently  prevents  an  amicable  adjustment  of  differ- 
ences. Such  contracts  have  very  distinctive  features  and  fre- 
quently guarantee  that  the  vessels  will  make  a  certain  num- 
ber of  knots  per  hour,  otherwise  they  will  not  be  accepted. 
This,  of  course,  except  under  very  unusual  conditions,  adds 
greatly  to  the  hazard. 

6 — SURVEYING. 

Such  bonds  are  somewhat  rare.  However,  surveyors  are 
sometimes  required  to  furnish  bond  guaranteeing  that  their 
work  will  be  accurately  performed.  The  professional  record 
of  the  applicant  is  an  important  consideration  in  the  matter. 

7 — PATENTS. 

Bonds  are  required  from  time  to  time  to  be  given  by 
the  owner  of  a  patent,  against  whom  there  are  standing 
proceedings  for  infringement,  in  favor  of  a  distributor  or 
dealer,  who  is  selling  the  article  in  question,  to  protect 
the  latter  from  any  losses  he  might  sustain  if  the  infringe- 
ment proceedings  should  result  unfavorably  to  the  defendant. 
Whether  or  not  bonds  of  this  character  can  be  written  with 
safety  depends  both  upon  the  financial  standing  of  the  appli- 
cant, who  is  either  the  inventor  or  holder  of  the  patent 
rights,  and  upon  the  likelihood  of  the  infringement  proceed- 
ings being  carried  to  a  successful  issue. 

Another  variety  of  bond  involving  patents,  occasionally 
encountered  by  surety  companies,  is  that  guaranteeing  to  an 
inventor  either  the  perfection  or  the  protection  of  his  patent 
rights.  These  risks,  however,  should  properly  be  undertaken 
by  a  company,  which  makes  such  business  its  specialty  and 
which  has  the  requisite  force  and  experience  to  examine  tech- 
nically the  merit  of  a  case  presented. 

74 


FIDELITY   INSURANCE   AND   CORPORATE    SURETYSHIP. 
8 — GUARANTEEING   FRANCHISES    TO   PUBLIC   BODIES. 

These  bonds  are  distinguished  from  those  treated  under  the 
head  of  Municipal  Licenses  and  Excise  bonds  (Ch.  XII),  for 
the  reason  that  the  franchise  is  usually  in  the  form  of  a  con- 
tract between  the  individual  or  corporation  and  the  state  or 
municipality.  The  bond  is  given  for  the  purpose  of  guaranteeing 
compliance  with  the  provisions  of  the  franchise.  The  liability 
varies  greatly,  and  in  many  cases  it  is  extremely  hazardous. 
Frequently,  however,  where  the  corporation  is  a  large  one,  and 
of  a  public  nature,  the  business  is  looked  upon  as  desirable. 
By  a  careful  study  of  the  proposition  offered,  the  true  lia- 
bility can  be  discerned,  and  the  good  business  distinguished 
from  the  bad.  Attention  is  called,  however,  to  those  bonds 
given  to  municipalities  for  the  construction  or  maintenance 
of  streets  or  sidewalks,  which  ought  to  be  classed  under  "  Con- 
tract Constructural  Bonds."  As  the  ordinances  and  fran- 
chises of  different  municipalities  vary  greatly,  the  agent  or 
solicitor  should  study  the  local  laws  in  order  to  arrive  at  the 
true  liability  on  these  bonds. 

9 — STREET    LIGHTING. 

Bonds  under  this  head  may  be  divided  as  follows: 

a — Those   in   which   the   contract  calls   for   lighting   and 

trimming  of  the  lamps  only, 
b — Those  in   which  the  contractor  agrees  to   supply  the 

material  or  power   necessary  for  lighting, 
c — Those  covering  both  the  supplying  of  material  and  the 

lighting  and  trimming. 

As  a  rule,  bonds  under  class  a  cover  simply  the  supplying 
of  labor,  which  makes  them  comparatively  safe  risks;  while 
class  &  may  cover  not  only  this  but  the  furnishing  of  elec- 
tricity, gas  or  oil,  and  in  some  cases  the  erection  and  main- 
tenance of  wires  or  poles.  Where  the  latter  features  are 
involved,  the  source  from  which  the  light  is  to  be  secured 
must  be  looked  into  and  every  precaution  taken  to  insure  a 

75 


FIDELITY    INSURANCE   AND   CORPORATE    SURETYSHIP. 

sufficient  and  regular  supply.  The  bonds  found  in  classes  6 
and  c  are,  therefore,  much  more  hazardous  than  the  obliga- 
tions of  the  a  group. 

10 — FURNISHING    SCHOOL    BOOKS. 

These  obligations  are  entered  into  by  contractors  who  are 
awarded  contracts  to  furnish  books  to  public  schools.  They 
are  not  classified  as  Supply  Bonds,  as  they  usually  contain 
many  special  features,  such  as  the  return  of  the  books,  etc. 
When  the  contracting  firm  is  a  well  recognized  publishing 
house,  they  are  looked  upon  favorably. 

11 — REMOVAL  OF  GARBAGE. 

Many  municipalities  are  accustomed  to  arrange  by  contract 
for  the  removal  of  their  garbage.  In  these  cases,  the  con- 
tracts sometimes  simply  call  for  the  collection  of  the  garbage 
or,  on  the  other  hand,  for  the  disposal  of  it  when  delivered 
to  the  contractor  by  the  city.  Usually  the  contractor  is  em- 
ployed for  both  purposes.  When  the  agreement  is  simply  for 
disposal,  the  business  may  be  considered  good  under  certain 
conditions.  Where  the  contractor  undertakes  to  collect  the 
garbage,  the  business  is  considered  hazardous,  because  the 
amount  gotten  will  vary  according  to  season  and  the  pros- 
perity of  the  community,  and  also  for  the  reason  that  the 
bond  in  such  an  instance  is  usually  given  to  cover  a  term 
of  years. 

12 GUARANTEEING    WAREHOUSE    RECEIPTS. 

Bonds  of  this  division  should  not  be  confused  with  Ware- 
house Bonds  given  by  distillers  under  the  Internal  Eevenue 
Laws  (Ch.  XI),  or  with  those  entered  into  by  either  public  or 
grain  warehouses,  as  required  by  statute  in  many  states  (Ch. 
XII) .  What  we  are  here  considering  are  guarantees  required  by 
borrowers,  when  placing  goods  in  warehouses,  for  the  purpose 
of  securing  protection  additional  to  the  ordinary  warehouse 
receipt,  and  such  as  may  facilitate  the  borrowing  of  money 
from  their  banks.  When  the  guaranties  covering  such  ware- 

76 


FIDELITY   INSURANCE    AND   CORPORATE    SURETYSHIP. 

house  receipts  refer  both  to  the  quantity  and  quality  of  the 
article  stored,  they  can  be  extremely  hazardous.  However, 
in  the  large  recognized  concerns,  whose  warehouse  is  a  sep- 
arate building,  built  for  the  purpose,  and  where  the  corpora- 
tion is  conducted  independently  of  the  persons  desiring  such 
guaranteed  receipts,  the  bonds  may  sometimes  be  profitably 
issued.  Very  frequently,  however,  the  warehouse  is  estab- 
lished by  a  set  of  merchants  or  manufacturers  who  desire 
to  help  their  own  borrowing  ability.  In  such  cases,  through 
neglect,  either  willful  or  otherwise,  the  system  for  the  proper 
protection  against  over-issue,  inspection,  and  delivery  of  the 
article  stored  is  not  as  efficient  as  in  the  independent  ware- 
house; and  this  compels  surety  companies  to  charge  such  a 
rate  of  premium,  in  order  to  properly  check  up  and  inspect 
the  articles  stored,  as  to  make  it  cost  the  borrower  more  than 
he  can  afford  to  pay.  This  added  cost  is  frequently  greater 
than  the  difference  in  the  rate  of  interest  between  borrowing 
money  on  these  warehouse  receipts  and  on  the  individual 
capacity  of  the  borrower. 

13 — GUARANTEEING  FREIGHT  BILLS. 

Such  bonds  are  required  by  railroads  and  steamship  com- 
panies from  their  patrons  in  order  to  obviate  the  necessity 
for  the  payment  of  freight  before  the  commodities  are  de- 
livered or  shipped.  They  guarantee  that  the  freight  will  be 
paid  at  a  subsequent  date.  When  the  date  of  settlement  com- 
prises a  reasonably  short  period,  and  the  financial  standing 
of  the  applicant,  when  looked  at  in  connection  with  the  credit 
to  be  extended,  is  satisfactory,  the  bonds  can  be  written  with- 
out collateral,  otherwise  collateral  or  indemnity  should  be 
secured. 

14 — GUARANTEEING    PAYMENT    OF    RENT. 

This  business  is  sometimes  classed  under  the  heading  of 
"  Lease  Bonds,"  and  covers  those  instances  where  the  lessee 
enters  into  an  agreement  to  rent  property  for  a  certain  period 

77 


FIDELITY   INSURANCE   AND   CORPORATE    SURETYSHIP. 

at  a  fixed  rate.  In  order  to  guarantee  the  prompt  payment 
of  rent  and  for  the  purpose  of  being  protected  for  the  entire 
term,  the  lessor  requires  a  bond  guaranteeing  compliance 
with  the  terms  of  the  lease.  This  is  especially  the  case  where 
the  lessor  has  altered  and  improved  the  property  to  meet 
the  particular  needs  of  lessee.  The  only  condition  under 
which  these  obligations  should  be  executed  is  that  there 
will  be  collateral  amounting  to  the  full  penalty.  If,  how- 
ever, the  lessor  will  accept  a  bond  whereby  he  agrees  to  imme- 
diately notify  the  surety  of  default,  and  one  containing  a 
cancellation  clause,  providing  that  the  liability  of  the  surety 
shall  cease  at  the  expiration  of  thirty  days'  notice,  then 
the  business  can  well  be  written,  provided  two  months'  rent 
is  secured  in  advance.  A  lessor,  however,  is  usually  reluctant 
to  make  this  arrangement. 

15 — REPLACING  OF  PROPERTY  AFTER  ALTERATION. 

This  situation  arises  where  the  lessee  of  property  desires  to 
put  it  into  a  condition  suitable  for  his  purpose  by  alterations 
at  his  own  expense.  The  lessor  in  such  a  case  may  require  the 
lessee  to  furnish  a  bond  guaranteeing  the  restoration  of  the 
property  to  its  original  condition  at  the  expiration  of  the 
lessee's  tenancy.  It  is  generally  necessary  for  the  surety,  ex- 
cept in  very  rare  cases  or  for  very  large  corporations,  to  obtain 
collateral  amounting  to  the  full  penalty  of  the  bond,  especially 
as  they  usually  run  for  a  term  of  years. 

16 — BONDS  ISSUED  AGAINST  LIENS. 

This  particular  class  of  business  has  caused  considerable  loss. 
These  bonds  are  generally  required  where  the  principal  has  in- 
sufficient funds  to  complete  the  building.  In  order  to  raise  the 
necessary  amount,  he  desires  to  secure  a  loan  from  a  bank, 
building  association,  or  an  individual,  and  as  security  he  exe- 
cutes a  mortgage  covering  the  building  to  be  erected,  or  in 
process  of  completion.  If  the  lender  is  not  satisfied  with  the 
sufficiency  of  the  mortgage,  he  demands  of  the  principal  a  bond 

78 


FIDELITY   INSURANCE   AND   COEPOEATE    SURETYSHIP. 

guaranteeing  that  the  building  will  be  completed  according  to 
certain  definite  plans  and  specifications  free  of  all  liens,  in 
order  that  his  claim,  in  the  shape  of  the  mortgage,  may  be 
perfected  if  necessary. 

What  makes  this  class  of  risks  hazardous  is  the  fact  that 
the  money  advanced  to  the  principal  may  be  diverted  by 
him  into  other  channels,  and  in  the  event  of  his  being  unable 
to  finally  complete  the  building,  the  surety  would  be  called 
upon  to  fulfill  the  contract.  Where  this  misappropriation 
occurs,  there  is  no  recourse  against  the  principal  except  in 
a  civil  proceeding,  and  while  a  judgment  is  an  absolute  cer- 
tainty, still  it  affords  little  protection.  Of  course,  the  surety 
would  be  subrogated  to  its  principal's  equity  in  the  property, 
but  in  order  to  get  a  clear  title,  an  expense  would  have  to 
be  incurred  which  would  hardly  offset  the  value  thereby 
secured.  Losses  may  also  occur  through  honest  error  of 
judgment  in  miscalculation  as  to  the  cost  of  a  building.  In 
such  a  case  additional  money  is  required,  with  the  result  that 
the  surety  might  be  compelled  to  advance  the  same,  inasmuch 
as  it  has  guaranteed  the  completion  of  the  building  according 
to  certain  definite  plans  and  specifications. 

17 STAR    ROUTE. 

These  bonds  are  required  by  the  United  States  Postal  De- 
partment of  those  contractors  who  agree  to  deliver  mail 
between  postoffices  at  distant  points.*  Their  execution 
has  been  practically  discontinued  by  all  surety  companies, 
except  in  rare  cases.  The  reason  for  this  is  that,  as 
a  rule,  the  financial  ability  and  integrity  of  contractors  bid- 
ding on  this  class  of  work  is  not  sufficient  to  make  the 
risk  desirable,  especially  when  considered  in  view  of  the  strict 
rulings  of  the  United  States  Postal  Department  in  reference 
to  the  "  non-delivery  of  mail  in  all  kinds  and  conditions  of 
weather."  Another  item  of  consideration  is  the  fact  that 


*  Risks  under  this  heading  should  not  be  confused  with  the  bonds 
treated  in  chapter  X,  page  121. 

79 


FIDELITY  INSURANCE  AND  CORPORATE   SURETYSHIP. 

owing  to  a  change  of  general  mail  routes,  or  for  some  other 
unforeseen  reason,  the  amount  of  mail,  in  weight,  may  increase 
very  largely,  and  this  would  make  the  contract  much  more 
arduous  to  the  contractor  than  at  first  anticipated.  There 
have  been  some  very  heavy  losses  on  this  business,  and  it  is 
practically  prohibited.  These  statements  can  also  be  applied 
to  the  "  Screen  Wagon  Service,"  for  the  delivery  of  mail  be- 
tween postoffices  and  railroad  or  steamboat  depots,  as  the 
Government  usually  contracts  for  this. 


80 


CHAPTER  VI. 

BID  OR  PROPOSAL  BONDS. 

It  has  been  thought  advisable  to  treat  these  bonds  in  a 
separate  chapter,  in  order  to  remove,  if  possible,  the  misunder- 
standing that  generally  exists  upon  the  part  of  many  agents 
and  solicitors,  as  well  as  in  the  mind  of  the  public,  in  regard 
to  the  exact  nature  of  the  liability  under  them.  It  is  the 
prevailing  impression  that  there  is  very  little  hazard  Under 
a  Bid  or  Proposal  Bond.  As  a  matter  of  fact,  the  losses  under 
these  obligations  are  proportionately  greater  than  those  sus- 
tained under  final  Contract  Bonds.  This  fact  should  not  be 
lost  sight  of  by  the  readers  of  this  manual. 

WHEN  PROPOSAL  BONDS  ARE  REQUIRED. 

Bid  or  Proposal  Bonds  can  be  used  in  practically  all  cases 
where  contracts  are  made.  They  follow  two  general  lines, 
and  are  so  drawn  as  to  guarantee: 

1 — That  if  the  bidder  is  awarded  the  contract,  he  or  his 
surety  will  furnish  the  final  bond  to  guarantee  the  fulfillment 
of  the  contract. 

2 — That  if  the  bidder  is  successful,  the  obligation  acts  as 
the  final  bond  and  guarantees  fulfillment  of  the  contract. 

These  bonds  can  be  hazardous,  and  are  more  so  than 
the  final  bond,  because  at  the  time  a  Bid  Bond  is  exe- 
cuted, certain  information  of  essential  value  to  the  under- 
writer is  not  available.  The  most  important  feature  lacking 
are  the  figures  of  the  other  bidders,  by  means  of  which  the 
underwriter  can  gauge  to  some  extent  the  correctness  of  the 
applicant's  estimates.  It  is  also  often  true  that  other  in- 
formation is  not  to  be  had;  for  instance,  the  date  at  which 
the  contract  is  to  be  completed,  or  perhaps  the  engineer's  or 

81 


FIDELITY   INSURANCE   AND   CORPORATE    SURETYSHIP. 

architect's  estimate.  As  these  features  are  the  essentials 
upon  which  the  underwriter  should  base  his  decision,  he  is 
necessarily  unable  to  pass  upon  the  case  as  intelligently  as 
prudence  would  dictate,  when  they  are  lacking. 

The  opinion  is  general,  that  in  executing  a  Bid  or  Pro- 
posal Bond,  the  chance  that  the  particular  contractor  may 
not  be  awarded  the  contract  lessens  the  liability.  This,  how- 
ever, is  pure  speculation,  and  not  intelligent  underwriting. 
The  bond  of  every  bidder  in  any  particular  case  ought  to  be 
looked  upon  as  that  which  will  cover  the  final  completion. 
In  other  words,  no  Bid  or  Proposal  Bond  is  necessarily  a 
good  risk  simply  because  the  bidder  is  but  one  of  a  number. 
The  possibility  that  he  may  not  obtain  the  work  must  never 
enter  into  the  underwriter's  decision. 

The  same  investigation  is  made  of  these  bonds  as  in  the 
case  of  ordinary  Contract  Bonds,  with  the  addition  that  every 
effort  must  be  put  forth  to  determine  the  fact  that  the  appli- 
cant for  a  Bid  or  Proposal  Bond  is  a  careful,  experienced, 
competent,  and  legitimate  bidder.  To  bring  out  this  informa- 
tion, it  is  necessary  to  consider  carefully  the  details  of  the 
proposed  work,  and  to  compare  them  with  the  bidder's  past 
record  and  experience  in  similar  lines,  and  with  his  financial 
ability  to  undertake  and  complete  the  work. 

In  occasional  cases  bids  are  requested  upon  a  unit  of  meas- 
ure basis,  when  the  total  amount  of  the  contract  can  not  be  de- 
termined in  advance.  This  happens  sometimes  when  bids  are 
asked  for  paving  contracts  for  a  municipality  at  so  much 
per  square  foot  for  all  the  work  that  may  be  required  during 
a  given  period.  It  may  also  occur  in  various  supply  contracts, 
as,  for  instance,  in  Government  contracts  for  stationery.  In 
cases  of  this  kind  the  financial  standing  and  general  ability 
of  the  bidder  should  measure  up  to  a  standard  even  higher 
than  where  the  amount  of  the  contract  is  known,  in  order 
to  provide  for  all  possible  contingencies  that  might  arise,  in 
case  the  total  amount  of  the  work  should  exceed  the  bidder's 
expectations. 

82 


CHAPTER  VII. 

JUDICIAL  BONDS. 

Under  this  chapter  are  grouped  those  bonds  which  are 
issued  on  behalf  of  fiduciaries,  as  well  as  all  those  given  in 
judicial  proceedings.  Owing  to  the  necessity  ol  promptness 
in  issuing  these  obligations,  it  has  become  the  practice  of 
surety  companies  to  provide  their  agents  with  powers-of- 
attorney,  so  that  they  will  be  in  a  position  to  promptly  exe- 
cute and  deliver  the  bonds.  As  these  bonds  when  once  filed 
in  court  cannot  be  cancelled,  the  representative  of  a  surety 
company  should  not  only  make  a  comprehensive  study  of  all 
the  different  hazards  surrounding  these  risks  but  ought  also 
to  use  every  precaution  in  regard  to  the  many  points  involved 
before  their  execution. 

Judicial  Bonds  are  not  only  viewed  as  if  on  an  insurance 
or  average  basis,  but  are  also  more  or  less  akin  to  credit 
or  banking  propositions.  In  such  obligations  the  surety  guar- 
antees not  only  that  the  applicant  is  honest  or  will  not  steal, 
but  that  he  will  collect,  invest  or  distribute  the  estate  accord- 
ing to  the  directions  of  the  courts  or  the  statutes  of  the  state 
in  which  the  bond  is  filed.  It  frequently  occurs  that  although 
the  applicant  is  perfectly  honest,  he  has  not  acquainted  him- 
self with  the  laws  governing  the  collection  and  distribution  of 
the  assets  of  the  estate,  nor  with  those  regulations  which 
stipulate  the  class  of  investments  which  are  deemed  proper 
to  be  made  and  which  will  meet  with  the  approval  of  the 
court.  In  such  contingencies,  it  will  be  readily  seen  that  a 
loss  under  a  bond  can  be  made  even  though  the  applicant 
be  perfectly  reputable.  Another  danger  is  that  the  principal 
will  not  keep  the  funds  of  the  estate  separate  and  distinct 
from  his  own  and  so  designated  as  to  be  easily  identified 


FIDELITY   INSUEANCE  AND  CORPORATE   SURETYSHIP. 

at  all  times.  Such  a  state  of  affairs  makes  it  difficult,  if 
not  impossible,  to  trace  and  follow  up  the  various  investments, 
so  that  when  the  final  accounting  is  had,  it  is  highly  probable 
that  a  loss  will  occur. 

CLASSIFICATION  OF  JUDICIAL  BONDS. 
For  the  purposes  of  this  chapter,  Judicial  Bonds  will  be 
divided  into  five  general  groups: 

1 — Bonds  given  on  behalf  of  administrators,  executors, 
assignees,  receivers,  etc.,  or  those  bonds  filed  in  "  short 
term  trusts." 

2 — Bonds  executed  on  behalf  of  guardians,  trustees,  con- 
servators, committees,  etc.,  or  bonds  filed  for  all 
permanent  or  "  long  term  trusts." 

3 — Bonds  filed  in  court  proceedings  such  as  attachment, 
replevin,  injunction,  for  appeal,  security  for  costs,  se- 
questration, etc.,  or  those  guaranteeing  the  prompt 
payment  of  money. 

4 — Bail  Bonds. 

5 — Libel  Bonds  required  in  admiralty  proceedings  in  the 
Federal  Courts. 

1 — BONDS   OF   ADMINISTRATORS,  EXECUTORS,  ASSIGNEES,   RE- 
CEIVERS, ETC.* 

Bonds  under  this  class  are  termed  "  short  term  trusts " 
for  the  reason  that  estates  handled  by  such  fiduciaries  are 
usually  wound  up  or  settled  in  less  than  two  years.  Gen- 
erally speaking,  these  trusts  are  those  in  which  the  duties 
of  the  person  administering  the  estate  under  proper  legal 
supervision  and  direction  are  practically  comprehended  in  a 
collection  and  distribution  of  the  assets;  in  contradistinction 
to  "  long  term  trusts  "  where  the  duties  of  the  trustee,  etc., 
are  of  a  continuing  nature  and  involve  the  preservation  of 


*  See  Appendix,  page  213. 

84 


FIDELITY   INSURANCE   AND  CORPORATE   SURETYSHIP. 

the  property,  whether  by  investment,  re-investment,  or  by 
whatever  other  means  are  adopted  from  the  necessity  imposed 
by  the  nature  of  the  trust. 

It  is  becoming  more  and  more  a  general  practice  for  surety 
companies  to  secure,  whenever  possible,  joint  control  with  the 
fiduciary  of  all  funds  handled  by  him  in  such  capacity.*  This 
cannot  be  done,  however,  in  all  cases  of  "  short  term  trusts," 
and  companies  are  willing  to  execute  these  bonds  without  such 
control  provided  the  standing  of  the  fiduciary,  with  reference 
to  his  financial  worth  and  integrity,  is  high,  and  if  he  is  repre- 
sented by  reputable  and  substantial  attorneys.  One  of  the 
reasons  why  such  exceptions  are  made  is  that  estates  coming 
under  this  group  as  a  rule  are  wound  up  under  the  scrutiny 
of  the  heirs  or  creditors. 

In  order  to  determine  the  advisability  of  the  execution  and 
proper  underwriting  of  these  obligations,  the  surety  endeavors, 
by  means  of  a  series  of  questions,  to  elicit  in  the  application 
for  the  bond  such  information  as  will  furnish  a  correct  idea 
of  the  applicant's  responsibility,  the  duties  of  the  trust  which 
he  assumes,  the  nature  of  assets  and  liabilities  coming  under 
his  charge,  and  the  possibilities  as  to  whether  any  unusual 
hazards  will  arise  during  the  administration  of  the  trust.** 
The  following  are  the  leading  questions  in  the  application: 

Inquiries  in  Application. 

a — Names  and  addresses  of  attorneys  connected  with  the 

estate. 

The  standing  of  the  attorneys  who  are  interested  in  the 
administration  of  any  estate  should  have  a  great  deal  to 
do  with  the  acceptance  of  the  risk,  for  even  though  the 
lawyers  have  no  legal  power  to  control  the  acts  of  the  prin- 
cipal, they  are,  as  a  rule,  in  such  close  relationship  to  him 
that  he  is  willing  to,  and  usually  does,  abide  by  their  direc- 
tions and  advice.  They  will,  if  men  of  high  standing,  see 


*  See  Appendix,   page   157. 

*  See  Appendix,  page  213. 


85 


FIDELITY   INSURANCE   AND    CORPORATE    SURETYSHIP. 

that   the   estate   is   administered   by   the   applicant  according 
to  law. 

b — The  name  of  the  bank  in  which  deposits, will  be  kept, 
and  that  of  the  depository  of  the  securities.  Name 
in  which  deposits  are  to  be  kept,  and  the  means  taken 
for  proper  identification  of  the  funds. 

The  purpose  of  obtaining  this  information  is  to  ascertain 
whether  the  bank  in  which  the  funds  are  deposited  is  a 
strong  and  safe  institution  and  one  approved  by  court,  and 
whether  the  funds  so  deposited,  belonging  to  the  estate  to 
be  administered,  will  be  so  designated  as  to  be  readily  dis- 
tinguished from  the  personal  property  of  the  fiduciary. 

c — Whether  the  cash  coming  into  the  hands  of  the  appli- 
cant is  to  be  invested  during  the  administration;  and 
if  so,  how? 

This  question  is  asked  for  the  reason  that,  if  there  be  any 
cash  belonging  to  the  estate,  it  is  desirable  to  ascertain  if 
the  same  will  be  invested  by  the  fiduciary  or  distributed. 
If  investments  are  to  be  made,  it  is  important  to  see  if  they 
be  in  accordance  with  the  law  or  the  ruling  of  court. 

d — Whether  the  principal  is  indebted  to  the  estate,  the 
amount  if  any,  and  how  secured? 

Any  risk  in  which  the  principal  owes  money  to  the  estate 
should  be  scrutinized  with  the  greatest  care,  in  order  to  be 
certain  that  the  applicant  is  in  a  position  to  pay  any  such 
indebtedness.  Such  amounts  are  held  to  be  assets  of  the  estate 
coming  into  the  hands  of  the  fiduciary,  and,  therefore,  the 
bond  is  responsible  for  any  loss  occurring  through  the  non- 
collection  of  the  same. 

e— Whether  the  principal  owns  property,  real  or  personal? 
Description  of  same. 

These  questions  are  important  in  order  to  secure  a 
detailed  financial  statement  from  the  principal.  Due  al- 

86 


FIDELITY  1NSUBANCE   AND  CORPORATE   SURETYSHIP. 

lowance  should  be  made  for  depreciation  in  values  given. 
It  is  reasonable  to  suppose  that  if  the  principal  under  a  bond 
is  possessed  of  considerable  means,  the  risk  is  more  desirable 
than  if  he  be  a  person  of  no  means,  for,  should  a  loss  occur, 
the  surety  would  be  somewhat  protected  by  the  principal's 
property.  From  the  answers  given  to  these  questions  an 
opportunity  is  also  afforded  to  judge  whether  the  principal 
is  a  successful  business  man.  The  supposition  usually  arrived 
at  is  that  a  person  who  can  successfully  handle  his  own 
affairs  can  likewise  satisfactorily  administer  an  estate. 

f — The  date  of  death  of  deceased. 

The  surety  should  know  of  any  unusual  delay  in  filing  bond. 
If  such  should  turn  out  to  be  the  case,  an  investigation  should 
be  made  as  to  the  cause  of  the  delay,  for  the  purpose  of 
determining  if  the  estate  is  still  intact. 

g — Names,  addresses  and  relationship  of  next  kin,  lega- 
tees, heirs-at-law  and  all  persons  interested  in  the 
estate. 

This  information  will  enable  the  surety  to  get  into  closer 
touch  with  the  administration  of  the  estate,  because  the 
answers  elicited  in  response  to  the  above  inquiries  often 
throw  considerable  light  upon  the  methods  and  conditions 
under  which  the  estate  is  to  be  administered. 

h — Description  of  assets,  real  and  personal,  and  the  lia- 
bilities of  the  estate. 

This  will  give  information  as  to  the  size  and  character 
of  the  estate,  and  show  to  whom  the  debts  are  due.  It  is 
important  for  the  surety  to  know  what  portion  of  the  estate 
is  in  real  and  what  portion  is  personal  property. 

Inquiries  to  Receiver  or  Assignee. 

If  a  bond  under  this  class  is  required  by  a  receiver  or 
assignee,  inquiry  should  be  made  as  to  whether  the  assets 

87 


FIDELITY  INSURANCE  AND  CORPORATE  SURETYSHIP. 

are  to  be  converted  into  cash  for  distribution  among  the 
creditors,  or,  whether  on  the  other  hand  a  reorganization  of 
the  business  or  estate  involved  is  expected.  There  is  con- 
siderably more  hazard  attached  to  a  bond  where  the  receiver 
or  assignee  is  to  continue  the  business  placed  in  his  hands 
by  the  trust,  than  in  the  case  where  he  is  simply  appointed 
for  its  liquidation. 

Additional  Information  Desired. 

The  aforegoing  brief  statement  gives  the  major  points  which 
ought  to  be  considered  in  the  execution  of  bonds  under  the 
classification  of  "  short  term  trusts."  However,  additional 
investigation  should  be  made  before  the  bond  is  executed  by 
the  agent  or  solicitor,  and  especially  as  to  the  integrity  and 
standing  of  the  principal  in  his  community.  To  emphasize 
the  necessity  of  this,  it  is  well  to  bear  in  mind  that  in  these 
and  other  fiduciary  bonds,  the  surety  guarantees  not  only 
the  fidelity  and  honesty  of  the  principal  but  also  that  he  will 
properly  handle  the  funds  of  the  estate  according  to  law. 

Indemnity  Agreement  Important. 

In  order  to  facilitate  both  the  collection  of  the  premiums 
and  also  to  emphasize  the  conditions  under  which  the  bond 
is  executed  on  behalf  of  the  principal,  it  is  customary  for 
the  principal  to  sign  what  is  known  as  an  Indemnity  Agree- 
ment. In  this  connection  an  agent  or  solicitor  will  save  him- 
self endless  trouble  and  avoid  any  misunderstandings,  which 
might  arise  in  regard  to  the  collection  of  the  first  and  sub- 
sequent years'  premiums  (such  amounts  should  be  filled  in 
most  carefully  in  the  Indemnity  Agreement  before  the  signa- 
ture of  the  principal  is  attached),  if  he  will  see  that  the 
principal  reads  this  agreement. 

In  addition  to  paying  the  annual  premium,  the  principal 
agrees  when  signing  the  "  Indemnity  Agreement "  that  certain 
things  will  be  done  by  him  during  the  administration,  such  as : 

88 


FIDELITY  INSURANCE   AND   CORPORATE    SURETYSHIP. 

a — To  furnish  the  company  with  copies  of  all  important 
court  papers  connected  with  the  settlement  of  the 
estate;  i.  e.,  the  inventory,  accountings,  etc. 

b — To  deposit  cash  and  security  belonging  to  the  estate 
in  the  bank  or  trust  company  designated  in  his  appli- 
cation, and  to  permit  the  representative  of  the  surety 
to  examine  them  at  all  reasonable  times. 

c — To  secure  an  order  of  court  before  converting  any  of 
the  assets  of  the  estate  into  cash. 

d — To  withdraw  money  from  bank  only  by  check  signed 
in  his  fiduciary  capacity  and  only  for  purposes  con- 
nected with  the  administration  of  trust. 

e — To  keep  true  and  accurate  papers  and  books  of  account 
of  his  trust,  such  books  and  accounts  to  be  open  to  the 
free  and  full  inspection  by  representative  of  the  surety. 

f — To  furnish  the  surety  upon  completion  of  trust  with 
full  and  complete  evidence  of  the  termination  of  lia- 
bility under  his  bond. 

If  the  principal  will  carry  out  the  obligations  to  which  he 
agrees  when  signing  the  Indemnity  Agreement,  there  will  be 
little  danger  of  loss  under  the  bond.  However,  the  surety 
ought  to  receive  from  the  principal  a  duplicate  of  all  papers 
filed  in  court,  as  well  as  a  copy  of  the  order  discharging  him 
as  such  fiduciary,  which  order  necessarily  cancels  all  future 
liability  under  his  bond,  and  does  away  with  the  necessity 
of  the  surety  calling  on  the  agent  for  same. 

2 — BONDS     EXECUTED     ON     BEHALF     OF     GUARDIANS,     TRUSTEES, 
CONSERVATORS,    COMMITTEES,    ETC.* 

Bonds  of  this  class  are  termed  "  long  term  trusts,"  and 
cover  those  risks  in  which  the  estate  will  be  in  the  hands 
of  the  fiduciary  for  a  longer  term  than  two  years.  Experi- 
ence shows  that  there  is  much  more  hazard  in  the  execution 
of  bonds  covering  "  long  term  trusts "  than  in  those  of  the 

*  See  Appendix,  page  215. 

89 


FIDELITY  INSURANCE  AND  CORPORATE   SURETYSHIP. 

former  class,  and  it  is  the  general  policy  of  all  surety  com- 
panies in  executing  them  to  secure  joint  control  of  the  funds 
with  the  principal.*  In  such  cases  the  securities  should  be 
deposited  in  a  safe  deposit  box,  and  the  cash  in  a  bank 
designated  by  the  court  of  proper  jurisdiction,  subject  only 
to  the  joint  access  or  signature  of  the  fiduciary  in  his  official 
capacity  and  the  agent  as  representative  of  the  surety. 

Usual  Inquiries  on  Application. 

The  information  necessary  for  the  proper  underwriting  of 
bonds  on  behalf  of  fiduciaries  in  "  long  term  trusts  "  is  ob- 
tained in  a  manner  similar  to  the  method  pursued  in  regard 
to  bonds  filed  in  "  short  term  trusts,"  the  chief  points  to 
be  considered  being  as  follows:** 

a — Has  a  bond  been  given  in  the  estate  before? 
No  surety  company  cares  to  write  bonds  on  behalf  of 
fiduciaries  in  partly  administered  estates,  whether  they  come 
under  the  head  of  "  short "  or  "  long  term  trusts."  There 
are,  however,  some  exceptions,  but  no  bond  under  these  con- 
ditions should  be  executed  until  a  most  thorough  investiga- 
tion is  made  and  satisfactory  explanation  is  given  why  a  new 
bond  is  desired.  Furthermore  an  audit,  made  by  a  regular 
court  officer,  to  ascertain  whether  the  estate  has  been  properly 
administered  and  if  the  assets  are  in  good  shape,  should  in- 
variably be  secured,  for  the  last  obligation,  as  a  rule,  carries 
the  liability  from  the  beginning  of  the  trust. 

b — Names  of  attorneys.     (See  "  short  term  trusts,"  page 

85.) 
c — Zs  applicant  indebted  to  trust  estate — amount  and  how 

secured?     (See  "short  term  trusts,"  page  86.) 
d — Full   names,   ages,  and  residences  of  wards,  and   the 
beneficiaries  of  the  trust,  with  the  names  of  the  per- 
sons entitled  to  the  trust  funds  in  event  of  the  death  of 
the  ward  during  the  administration  of  the  estate. 

*  See  Appendix,  page  157. 
**  See  Appendix,  page  215. 

90 


FIDELITY   INSURANCE   AND   CORPORATE    SURETYSHIP. 

From  this  information  an  idea  may  be  gathered  as  to  the 
length  of  time  the  estate  is  likely  to  remain  in  the  hands 
of  the  principal.  In  connection  with  this  an  investigation 
should  be  made  to  ascertain  the  relationship  of  the  principal 
to  the  wards  or  beneficiaries  of  the  estate.  If  the  applicant 
be  either  an  heir  or  a  close  blood  relation,  care  should  be 
taken  to  see  that  the  Indemnity  Agreement  is  thoroughly  un- 
derstood in  every  particular,  as  experience  and  statistics 
show  that  parents  or  close  relations  of  the  wards  or  bene- 
ficiaries, on  account  of  such  relationship,  are  apt  to  think 
that  they  can  administer  the  estate  with  more  latitude  than 
if  no  such  relationship  existed. 

e — A  description  of  the  estate  coming  into  the  hands  of 
the  applicant,  and  from  what  source  it  is  derived. 
(See  short  term  trusts,  page  87.) 

f — With  whom  are  wards  living,  and  how  much  is  re- 
quired for  their  annual  support. 

An  order  of  court  allowing  expenditures  of  funds  for  the 
support  of  ward  should  always  be  secured  by  the  principal. 
Answers  to  the  above  inquiry  are  important  especially  when 
taken  in  connection  with  that  of  the  data  elicited  under  (d) 
(supra). 

g — Is  any  portion  of  the  estate  already  invested, — 6t/ 
whom,  and  under  what  authority? 

No  investment  by  the  principal  should  be  made  without 
an  order  of  court. 

h — Financial  worth  of  principal. 

The  same  requirements  exist  here  as  under  "  short  term 
trusts." 

As  is  the  case  with  "  short  term  trusts,"  full  investigation 
as  to  the  moral  standing  and  integrity  of  the  principal  should 
be  made  in  the  same  manner  as  under  fidelity  propositions. 

91 


FIDELITY  INSURANCE   AND   CORPORATE    SURETYSHIP. 

Indemnity  Agreement. 

The  Indemnity  Agreement  to  be  signed  in  "  long  term 
trusts "  is  substantially  the  same  as  that  used  in  "  short 
term  trusts,"  to  which  the  reader  should  refer  (see  page 
213),  but  as  the  "long  term"  risks  are  only  written 
with  joint  control,  the  Indemnity  Agreement  contains  a  clause 
providing  for  such  supervision  over  the  funds  of  the  estate 
by  the  surety.* 

3 — BONDS  FILED  IN  COURT  PROCEEDINGS.** 

Bonds  of  this  class  are  the  most  hazardous  of  all  coming 
under  the  judicial  classification,  as  they  are  absolute  prom- 
ises for  the  payment  of  money  under  certain  definite  con- 
tingencies. The  universal  practice  of  all  surety  companies 
is  to  secure  collateral  for  an  amount  at  least  10%  greater 
than  the  amount  of  the  bond — the  10%  excess  being  given  to 
cover  the  court  costs  in  the  case. 

A  general  misunderstanding  seems  to  exist  in  connection 
with  this  branch  of  the  surety  business  as  to  the  practice 
of  surety  companies  in  not  accepting  personal  indemnity  as 
sufficient  collateral  for  their  protection  under  these  bonds, 
while  they  will  take  such  indemnity  under  many  of  the  obli- 
gations of  other  classes.  But  it  must  be  considered  that  the 
obligation  of  a  Judicial  Bond  is  of  a  distinctive  nature,  and 
the  security  mentioned  above  is  not  acceptable  and  cannot 
be  depended  upon  in  Judicial  Bonds,  inasmuch  as  such  obliga- 
tions guarantee  the  full  and  prompt  payment  of  money.  Ex- 
perience proves  that  the  collection  of  money  from  personal 
indemnitors  is  both  difficult  and  expensive. 

The  few  exceptions  where  deviation  is  made  from  the 
above  rule  are  in  the  case  of  bonds  for  small  amounts  given 
on  behalf  of  railroads,  railways  and  other  large  corporations. 
As  full  collateral  is  secured  on  these  propositions,  the  informa- 


*  See  Appendix,  page  215. 
**  As  Attachment,  Replevin,   Injunction,  Appeal,  etc. 

92 


FIDELITY   INSURANCE   AND   CORPORATE    SURETYSHIP. 

tion  required  in  the  application  is  simply  that  which  is 
necessary  for  the  proper  preparation  of  the  bond.  A  financial 
statement  of  the  principal  and  a  complete  filling  in  and  sign- 
ing of  the  Indemnity  Agreement  is  all  that  is  required.  Care 
should  be  taken  to  see  that  the  signature  of  the  principal  is 
legally  attested  and,  in  the  case  of  a  corporation,  that  the 
corporate  seal  is  affixed.* 

4 — BAIL  BONDS. 

It  is  the  custom  of  many  companies  not  to  write  Criminal 
Bail  Bonds,  and  no  company  will  write  them  unless  it  receives 
collateral  in  the  full  amount  of  the  bond. 

Recognizance  Bonds  in  civil  actions  are  less  hazardous  by 
far  than  Criminal  Bail  Bonds,  and  are  executed  by  most  com- 
panies, but  only  upon  the  same  collateral  requirements. 

5 — LIBEL  BONDS. 

Bonds  of  this  character  are  given  in  admiralty  proceedings. 
They  are  similar  to  attachment  bonds.  The  purpose  of  a 
Libel  Bond  is  to  cover  any  damage  which  may  be  sustained 
by  the  owner  of  a  vessel  on  account  of  the  wrongful  seizure 
of  the  ship  for  debt  or  any  other  claim.** 

JUDICIAL  BOND  FORMS. 

Bonds  to  be  filed  in  court  are  statutory  in  form  and  copies 
of  the  same  may  usually  be  obtained  from  the  clerks  of  the 
various  courts.  They  differ  somewhat  in  form,  but  the  lia- 
bility is  practically  the  same  in  each  state. 

CANCELLATION    OR    RELEASE    OF    JUDICIAL    BONDS. 

The  subject  of  securing  the  necessary  release  of  bonds 
treated  in  this  chapter  is  one  that  causes  the  agent  and 
solicitor  much  annoyance.  Thh  can  be  saved  if  a  proper 
understanding  is  had  with  the  principal  at  the  time  of  the 

*  See  Appendix,   page  217. 

**  Libel  Bonds  are  also  given  for  the  release  of  a  vessel  from 
seizure  under  a  libel. 

93 


FIDELITY  INSURANCE   AND   CORPORATE    SURETYSHIP. 

signing  of  the  Indemnity  Agreement.  Liability  under  Fidu- 
ciary Bonds  can  only  be  terminated  by  certain  legal  actions, 
and  the  trouble  above  referred  to  is  caused  by  the  difficulty 
the  surety  companies  have  in  obtaining  certified  copies  of  the 
necessary  papers  showing  a  legal  release  of  the  obligation. 
The  mere  statement  of  the  attorney  or  principal  under  a  bond 
of  the  foregoing  classes  is  not  sufficient  evidence  to  warrant 
the  surety  to  legally  cancel  the  liability. 

1 — MANNER  OF   OBTAINING    A  RELEASE  OF   LIABILITY   FOR  BONDS 
OF   "  SHORT   AND   LONG   TERM    TRUSTS." 

a — Completion  of  Trust. — When  the  fiduciary  has  completed 
his  trust,  it  is  proper  for  him  to  secure  (both  for  the  pro- 
tection of  himself  and  his  surety)  an  order  of  court  dis- 
charging him  from  any  further  duties  as  a  trustee,  etc.  Such 
an  order  can  be  obtained  from  the  court  upon  proper  petition, 
and  its  issuance  terminates  the  future  liability  of  the  surety. 
A  certified  copy  of  this  order  should  be  furnished  the 
surety.  Before  granting  an  order  of  this  nature  to  a  fiduciary, 
it  is  necessary  for  him  to  file  a  final  account  showing  all 
transactions  had  up  to  the  time  such  account  is  stated.  The 
same  should  be  approved,  ratified  and  passed  by  the  court, 
so  that  the  trustee  may  proceed  to  complete  the  trust  and 
receive  his  discharge.  In  some  cases  a  certified  copy  of  this 
final  account  will  be  acceptable  to  the  surety,  although  a 
duly  authenticated  order  of  dismissal  is  always  more  to  be 
desired. 

b — Improper  Administration  of  Trust. — When  the  surety 
has  reason  to  believe  that  the  estate  is  being  mismanaged, 
it  should  terminate  its  liability  under  bond  by  petitioning 
the  court  for  a  release.  The  statutes  in  nearly  every  state 
make  provision  for  such  a  contingency.  In  some  states  a 
reason  must  be  given  in  the  petition,  and  in  others  none  is 
required.  When  the  discharge  is  granted,  the  Court  requires 
the  fiduciary  to  file  a  new  bond.  The  future  liability  under 
the  first  bond  terminates  upon  the  filing  of  the  new  obligation, 

94 


FIDELITY  INSURANCE  AND  CORPORATE   SURETYSHIP. 

and  a  copy  of  such  release,  with  satisfactory  evidence  of  the 
filing  of  the  second  bond,  should  be  furnished  the  surety.  In 
some  states,  however,  the  surety  is  released  only  by  the 
fiduciary's  completing  his  trust.  In  all  cases,  where  a  peti- 
tion of  this  nature  is  granted,  the  surety  is  responsible  for 
liability  antedating  its  release. 

2 — CONCERNING  RELEASE  OF  BONDS  FILED  IN  COURT  PROCEEDINGS. 

The  statutes  of  no  state  provide  for  the  release  of  the  lia- 
bility of  a  surety  on  bonds  filed  in  court  proceedings  before 
the  judgment  is  satisfied,  damages  paid,  etc.  When  the  lia- 
bility which  requires  a  bond  to  be  filed  in  court  proceedings 
has  been  terminated,  the  surety  should  be  furnished  with 
copy  of  satisfaction,  or  a  certificate  of  the  clerk  of  the  court 
to  that  effect,  or  else  with  a  verified  copy  of  the  docket  entries 
showing  that  the  liability  is  at  an  end. 

3 — RELEASE    OF    BAIL    AND    LIBEL    BONDS. 

The  same  conditions  apply  in  the  case  of  bail  and  libel 
bonds,  as  are  noted  under  (2)  above. 

RENEWALS    ON    SECOND    AND    SUBSEQUENT    YEARS' 
PREMIUMS. 

The  term  "  renewal "  is  in  some  ways  a  misnomer,  but  is 
used  for  want  of  a  better  expression.  Judicial  Bonds  are 
not  renewed:  they  are  continuous  and  remain  in  force  until 
the  completion  of  the  trust,  or  removal  of  the  fiduciary.  It 
is  a  practice,  therefore,  for  surety  companies  to  bill  to  their 
agents  at  the  beginning  of  each  annual  period  the  premium 
for  the  coming  year.  Solicitors  and  agents  frequently  find 
these  premiums  difficult  to  collect.  This  is  caused  by  their 
not  having  emphatically  impressed  upon  the  principal,  when 
application  for  the  bond  was  made,  that  he  agreed  to  pay  the 
surety  an  annual  premium  until  he,  the  principal,  furnishes 
the  company  with  a  legal  release  from  liability  under  his  bond. 

95 


CHAPTER  VIII. 

MISCELLANEOUS  INDEMNITY  BONDS. 

There  are  many  necessary  kinds  of  Miscellaneous  Indem- 
nity Bonds,  the  liability  thereunder  having  a  wide  range.  The 
opinion  as  to  the  advisabilfy  of  the  acceptance  of  bonds  of 
this  class  differs  greatly  among  surety  companies,  so  that  all 
agents  and  solicitors  should  inform  themselves  as  to  the 
policy  of  the  company  with  which  they  are  associated.  The 
underwriter  on  a  proposition  requiring  a  bond  of  this  class 
should  be  furnished  with  full  and  detailed  information  as 
to  the  risk,  the  financial  responsibility  of  the  applicant,  to- 
gether with  a  statement  of  the  protection  that  will  be  offered 
the  surety  in  the  way  of  collateral  and  security.  The  most 
usual  bonds  of  this  class,  that  are  generally  brought  to  the 
attention  of  the  agent,  are,  as  follows: 

VARIOUS    KINDS     OF    MISCELLANEOUS     INDEMNITY 
BONDS. 

1 — BONDS    OF    INDEMNITY    COVERING   LOST    INSTRUMENTS. 

Bonds  of  this  group,  when  the  applicant's  reputation  is  un- 
questionable and  after  certain  preliminary  requirements  have 
been  fulfilled,  and  a  proper  rate  is  obtained,  may  be  stated  to 
be  acceptable  propositions.  When  satisfactory  they  are  written 
for  a  term  which  largely  depends  upon  the  statute  of  limita- 
tions in  effect  in  the  particular  state  in  which  the  risk  is 
located.  This  period  may  vary  from  two  to  twenty  years, 
and  in  some  rare  instances  is  unlimited.  It  may  also  depend 
upon  the  character  of  the  lost  instrument,  the  place  of  execu- 
tion and  performance  of  the  contract  (if  it  be  a  contract), 
and  the  laws  of  the  state  which  may  govern  the  validity,  in- 
terpretation or  performance  of  such  contract. 


FIDELITY  INSURANCE   AND   CORPORATE    SURETYSHIP. 

A  flat  premium  for  the  life  of  the  bond  should  be  charged 
and  ought  to  be  figured  on  the  penalty,  although  in  most 
cases  the  liability  is  but  one- half  of  the  penalty  of  the  bond. 

As  conditions  under  which  bonds  of  this  character  are 
desired  vary  greatly,  care  should  be  used  to  ascertain  ex- 
plicitly the  exact  nature  of  the  guarantee  to  be  supplied. 
An  affidavit  should  be  secured  from  the  applicant  (and  in 
complicated  cases  from  others  familiar  with  the  information 
desired)  embodying  the  following  points: 

a — An  exact  description  of  the  lost  instrument,  giving 
numbers  or  other  means  of  identification. 

b — Time,  place  and  conditions  under  which  it  was  last 
seen. 

c — The  probable  manner  of  its  loss  or  destruction  to  the 
best  of  the  affiant's  knowledge  and  belief.  (The  state- 
ment on  this  point  is  necessarily  somewhat  vague  in 
a  great  many  instances,  but  is  desirable  as  it  may 
throw  light  on  the  applicant's  business  ability  and 
general  trustworthiness. ) 

d — The  affidavit  should  also  state  that  the  instrument  was 
never  endorsed,  transferred,  or  rendered  negotiable  in 
any  manner,  and  that  the  sworn  statement  is  made 
for  the  specific  purpose  of  inducing  the  surety  to 
execute  the  bond  applied  for.  This  is  desirable,  as  it 
gives  a  basis  of  procedure  against  an  applicant  who 
has  made  wilful  misstatements  and  who  has  secured 
bond  with  a  fraudulent  intent. 

An  investigation  of  the  applicant  should  be  made  in  order 
to  insure  that  he  is  a  person  upon  whose  word  reliance  can 
be  placed,  and  not  a  person  habitually  careless  or  of  loose 
business  methods,  who  might  have  permitted,  or  allowed,  the 
instrument  to  be  disposed  of  without  being  fully  cognizant 

97 


FIDELITY  INSURANCE   AND   CORPORATE    SURETYSHIP. 

of  his  act.    These  cases  are  rare,  but  they  do  occur,  and  should 
be  guarded  against. 

Examples  of  Risks. 

The  most  desirable  risks  of  this  class  are  those  in  which 
the  instrument  has  been  lost  by  fire,  or  in  some  manner  which 
would  permit  of  no  doubt  of  its  having  passed  completely  out 
of  existence.  In  these  cases  the  affidavit  of  the  applicant  is 
nearly  always  definite,  and,  after  investigation,  usually  may 
be  accepted  as  final. 

A  slightly  more  hazardous  risk  is  when  the  instrument  has 
been  lost  or  mislaid  while  in  the  possession  of  the  principal, 
or  a  thoroughly  trustworthy  agent,  and  where  there  is  some 
chance  of  its  coming  to  light  and  falling  into  the  hands  of 
persons,  who  will  see  that  it  is  properly  returned  to  the 
obligee  under  the  bond. 

A  risk  that  presents  a  still  greater  hazard  is  where  the 
instrument  has  been  lost  in  some  unknown  manner,  and  is 
likely  to  come  into  the  possession  of  persons  who  might 
attempt  to  convert  it  to  their  own  profit. 

Perhaps  the  most  hazardous  risk  under  this  caption  is 
where  the  instrument  has  been  stolen.  A  bond  should  not 
be  executed  to  cover  such  a  condition  unless  a  very  long 
period  of  time  has  elapsed  since  the  theft,  and  something 
definite  is  known  regarding  the  person  taking  it,  the  manner 
in  which  it  was  obtained,  etc.  As  the  hazard  depends  greatly 
upon  the  negotiability  of  the  instrument,  it  is  hard  to  classify 
accurately  and  in  concise  form,  the  exact  hazard  from  this 
cause,  as  the  ease  with  which  various  instruments  can  be 
negotiated  or  turned  to  improper  use  varies.  The  personal 
equation  also  enters  as  a  phase  of  this  risk,  for  even  though 
the  instrument  should  fall  into  the  wrong  hands,  much  would 
depend  upon  the  skill  and  knowledge  which  is  used  in  at- 
tempting to  realize  on  it. 

98 


FIDELITY  INSURANCE   AND   CORPORATE    SURETYSHIP. 

Hazard  on  the  Risks. 

The  hazard  under  bonds  of  this  class  differs  considerably 
in  each  risk  taken,  and  is  principally  influenced  by  the  man- 
ner in  which  the  instrument  was  lost  or  destroyed.  All  risks 
of  this  class  will  be  affected  in  varying  degrees  according  to 
the  exact  kind  of  instrument  concerned.  For  instance,  a 
lost  bank  book  representing  an  account  upon  which  the  name 
of  the  depositor  might  be  easily  forged,  would  be  more 
hazardous  than  a  guarantee  based  on  a  lost  life  insurance 
policy.  It  is  practically  certain  that  the  policy-holder 
would  be  personally  known  to  the  agent,  with  the  almost 
necessary  result  that  the  business  of  realizing  upon  the  policy 
to  the  detriment  of  the  surety  would  have  to  be  transacted 
through  the  agent,  whereas  in  some  cases  a  third  party 
can  make  withdrawals  from  a  savings  bank  account.  As 
practically  every  negotiable  instrument  having  a  transfer- 
able value  may  be  embraced  under  bonds  of  this  kind,  a 
complete  list  would  be  too  voluminous  for  practical  use.  The 
most  usual  cases,  however,  are  those  covering  the  loss  of  bank 
books,  certificates  of  deposit,  drafts,  warehouse  receipts, 
promissory  notes,  endorsed  checks,  stocks,  unregistered  bonds, 
convertible  securities  of  all  kinds,  policies  of  insurance  hav- 
ing cash  surrender  or  loan  value,  etc. 

2 — BONDS    OF    INDEMNITY    REQUIRED    BY    LIFE    INSURANCE    COM- 
PANIES   AND    FRATERNAL    ORDERS. 

Another  miscellaneous  form  of  indemnity  is  that  required 
by  life  insurance  companies  or  fraternal  orders  paying  death 
benefits,  in  the  case  of  a  person  supposed  to  be  dead,  where 
no  actual  proof  of  death  can  be  procured.  Under  proper  con- 
ditions these  bonds  may  be  written,  although  they  should  be 
looked  into  most  minutely  to  eliminate  as  far  as  possible  any 
doubt  of  the  actual  death  of  the  person  upon  whom  the  in- 
surance was  issued. 

99 


FIDELITY   INSURANCE   AND   CORPORATE    SURETYSHIP. 

3 — INDEMNITY   BONDS    COVERING   TITLES    TO   REAL   AND   PERSONAL 
PROPERTY. 

These  bonds  are  given  to  protect  a  third  person  from 
loss  in  selling  or  buying  property,  the  title  to  which  is 
not  altogether  clear.  Where  it  is  desired  to  guarantee  title 
to  real  property,  the  proposition  should  be  examined  care- 
fully, in  order  to  determine  whether  or  not  it  should  be 
referred  to  a  title  insurance  company  having  the  proper 
facilities  for  the  investigation  and  execution  of  such  guar- 
anties. 

In  case  of  personal  property  (as  of  a  manufactured  article 
when  infringement  upon  patent  is  alleged,  or  even  upon  real 
property  which  has  certain  debts  or  liens  against  it),  bonds 
may  be  executed  by  a  surety  company  in  exceptional  instances. 
However,  in  those  bonds  which  cover  patent  infringements, 
care  should  be  taken  to  discern  whether  the  guarantee  re- 
quired could  not  better  be  given  by  a  patent  guarantee 
company. 

4 — BONDS    OF    INDEMNITY    GUABANTEEING    THE    PRODUCTION    OF 
CERTAIN  ARTICLES  AT  A  GIVEN  TIME. 

Another  kind  of  bond  coming  under  this  general  head  is 
that  which  is  given  for  guaranteeing  the  production,  under 
certain  circumstances  or  at  a  certain  time,  of  an  instrument 
or  document.  (These  bonds  must  not  be  confused  with  bonds 
of  a  somewhat  similar  nature  given  to  the  United  States 
Custom  House.  See  chapter  XI.)  For  example,  a  bond 
might  be  required  by  a  railroad  of  the  consignee  when  a 
bill  of  lading  was  not  at  hand  at  the  time  the  goods  it 
covered  were  wanted.  It  also  is  necessary  in  some  cases  to 
have  a  bond  of  this  kind  before  a  certain  instrument  can 
be  issued,  as,  for  instance,  a  deed  of  property  which  is  or 
might  be  subject  to  a  lien  or  debt.  In  this  latter  case,  the 
bond  is  slightly  different  from  the  one  above  mentioned  re- 
ferring to  the  sale  or  purchase  of  property. 

100 


FIDELITY  INSURANCE   AND   CORPORATE   SURETYSHIP. 

5 — MISCELLANEOUS     INDEMNITY    BONDS     IN     CONNECTION     WITH 
JUDICIAL    CASES. 

Under  this  caption  the  bonds  usually  noted  are  as  follows: 

a — Bonds  in  favor  of  an  executor  or  administrator  who 

for  certain  reasons  has  advanced  money  to  a  person 

entitled  to  a  portion  of  the  funds  of  the  estate  under 

his  control. 

The  condition  of  this  bond  would  be  that,  in  the  event  of  a 
claim  being  filed  against  the  estate  in  excess  of  the  funds  in 
the  hands  of  the  fiduciary,  the  person  to  whom  the  money 
has  been  advanced  will  repay  the  amount  so  advanced  or  a 
sum  sufficient  to  liquidate  the  debts  of  the  estate.  In  such 
bonds  great  care  should  be  taken  to  see  that  the  applicant 
for  the  bond  is  either  worth  considerable  money,  or  that  the 
property  or  money  given  him,  and  covered  by  the  bond,  is 
properly  set  aside  and  held  pending  the  liquidation  of  the 
debts  of  the  estate. 

b — Bonds  given  to  a  person  purchasing  real  property  from 
an  estate  and  conditioned  to  protect  the  purchaser 
against  claims  filed  in  the  estate,  which  would  be  liens 
on  the  property  in  the  event  of  its  being  sold  prior  to 
the  expiration  of  the  time  fixed  by  law  for  the  filing 
of  claims  against  the  estate. 

These  obligations  are  usually  required  in  those  states,  where 
the  time  in  which  claims  may  be  filed  and  made  legally  binding 
on  the  estate  is  unusually  long.  They  should  be  issued  only 
when  the  applicant  is  financially  responsible  and  when  good 
convertible  collateral  is  furnished  for  the  protection  of  the 
surety.  In  addition  to  this  precaution,  the  assets  of  the  estate 
should  be  very  much  in  excess  of  all  known  debts. 

These  bonds  should  not  be  confused  with  ordinary  Judicial 
Bonds  for  the  sale  of  real  estate,  which  guarantee  that  the 
applicant  will  properly  sell,  deposit,  or  dispose  of  the  funds 
arising  therefrom  according  to  law. 

101 


FIDELITY  INSURANCE   AND   CORPORATE   SURETYSHIP. 

BOND  FORMS. 

The  form  required  for  a  Miscellaneous  Indemnity  Bond 
must  be  drawn  to  cover  the  circumstances  in  each  case.  In 
all  instances,  however,  it  should  bear  the  names  of  the  prin- 
cipal as  well  as  that  of  the  surety;  and  should  never  be 
executed  where  the  former  is  omitted,  for  the  reason,  that 
in  case  of  default  the  surety  desires  to  hold  the  principal 
under  the  common  law  for  any  loss  sustained  in  addition 
to  the  security  offered  by  the  indemnity  given  when  the  bond 
is  issued.  In  addition  the  form  in  the  case  of  lost  instru- 
ments should  contain  certain  recitals  embodying  in  effect 
the  statements  contained  in  the  affidavit  as  to  the  description 
of  the  instrument,  and  manner  of  its  loss,  etc.  It  should 
be  so  drawn  as  to  limit  the  surety  to  the  amount  named 
in  the  obligation,  for,  in  certain  cases  in  the  absence  of  this 
provision,  it  might  be  treated  as  an  agreement  to  be  liable 
for  a  greater  sum,  or  to  pay  to  individuals  or  corporations 
other  than  those  intended  by  the  surety  when  assuming  the 
risk. 


102 


CHAPTER  IX. 

BONDS  ON  BEHALF  OF  STATE,  COUNTY  AND 
MUNICIPAL  OFFICIALS. 

These  bonds  are  given  to  cover  state,  county,  and  muni- 
cipal officers  together  with  their  deputies  and  clerks,  and 
guarantee  the  faithful  performance  of  their  official  duties, 
which  are  usually  prescribed  by  law.  As  in  a  majority  of 
cases  the  form  of  bond  is  fixed  by  statute,  the  surety  can 
in  no  way  modify  the  form  or  reduce  the  liability  thereby 
assumed.  The  laws  of  different  states  and  municipalities 
applicable  to  officials  of  the  same  title  vary  materially,  and 
the  true  liability  can  only  be  determined  after  consult- 
ing the  ordinance  or  law  covering  the  particular  office.  In 
most  cases  the  obligations  treated  under  this  heading  guar- 
antee not  only  the  honesty  of  the  principal  but  also  the  faith- 
ful performance  of  his  duty,  and  this,  of  course,  imposes  on 
the  surety  greater  liability  than  is  assumed  under  fidelity 
risks,  where  the  surety's  liability  is  usually  limited  to  such 
acts  as  may  be  occasioned  by  larceny  or  embezzlement. 

The  many  technical  points  to  be  considered  in  connection 
with  the  different  state  laws  and  the  influences  brought  to 
bear  on  the  election  or  appointment  of  these  officials  make 
this  division  of  the  surety  business  most  hazardous.  There- 
fore, it  would  be  well  for  the  agent  or  solicitor  to  post 
himself  as  to  what  is  the  effect  of  the  law  in  relation  to 
public  officials  in  his  particular  state  or  municipality,  so 
that  he  may  be  able  to  talk  intelligently  regarding  the  lia- 
bility thereunder.  The  agent  should  also  furnish  the  surety 
with  full  information  as  to  the  laws  or  ordinances  applicable 
to  the  bonds  desired. 

103 


FIDELITY  INSURANCE   AND   CORPORATE   SURETYSHIP. 

CLASSIFICATION    OF    BONDS    CONSIDERED    IN    THIS 
CHAPTER. 

Bonds  given  on  behalf  of  state,  county  and  city  officials 
may  be  divided  into  two  general  classes. 

1 — BONDS    OF    OFFICIALS    NOT    HANDLING    MONEY. 

Bonds  of  this  group  cover  the  performance  of  official  duties, 
and,  in  addition,  practically  guarantee  the  applicant's  integ- 
rity and  knowledge  of  the  proper  method  to  pursue  in  the  con- 
duct of  his  office.  As  the  officers  under  this  class  do  not  handle 
money,  the  risk  on  the  bond  is  not  as  great  as  would  be  the 
case  of  those  treated  under  ( 2 ) ,  though  in  some  instances 
where  fraud  may  be  practiced,  large  losses  may  be  sustained. 

2 — BONDS    OF    OFFICIALS    HANDLING     MONEY. 

Bonds  of  this  class  guarantee,  in  addition  to  the  faithful 
performance  of  duty,  that  all  funds  will  be  properly  accounted 
for  as  the  law  prescribes.  No  such  bond  should  be  written 
until  the  applicant  passes  an  investigation,  that  will  sub- 
stantiate the  fact  that  he  has  the  necessary  business  capacity 
to  fill  the  position  properly.  In  addition  to  this,  the  agent 
should  ascertain  whether  the  risk  is  a  good  moral  one. 

BONDS  FROM  EMPLOYEES  SHOULD  BE  REQUIRED. 

When  the  surety  company  issues  a  statutory  form  of  bond 
for  any  official  having  deputies  or  employees,  it  virtually  covers 
the  office  as  well  as  the  individual  officer,  and  in  event  of  de- 
falcation on  the  part  of  any  employee  or  deputy,  he  and  his 
surety  would  both  be  liable.  For  this  reason  the  company 
should  always  insist  before  executing  such  instruments  (both 
for  its  own  protection  as  well  as  that  of  its  principal),  that 
the  chief  official  require  bonds  in  his  favor  from  all  deputies 
and  employees  under  him,  with  a  penalty  large  enough  to 
protect  him  in  any  emergency. 

Important  to  Know  Who  is  Responsible. — One  of  the  most 
important  facts  to  be  determined  in  the  underwriting  of  the 

104 


FIDELITY  INSURANCE   AND   CORPORATE   SURETYSHIP. 

bond  of  a  public  official  who  handles  money  is,  whether  he  is 
absolutely  responsible  for  the  funds  in  his  care,  i.  e.,  held 
by  him  or  deposited  in  bank.  The  reason  for  this  is,  that 
the  courts  of  several  states  have  held  that  the  official  and 
his  surety  are  not  liable  for  the  loss  of  public  funds  occa- 
sioned by  bank  failure,  provided  the  official  exercise  due 
diligence  in  selecting  a  depository.  In  a  number  of  states 
the  depositories  are  selected  by  law;  in  which  event,  if  the 
official  complies  with  such  laws  in  depositing  the  public  funds 
coming  into  his  possession  in  the  designated  banks,  neither 
he  nor  his  surety  is  liable  for  any  loss  that  may  be  so 
occasioned.  In  a  majority  of  the  states,  however,  there 
are  no  laws  regulating  the  deposit  of  public  funds,  so  that 
the  official  and  his  surety  are  held  as  absolute  guarantors 
of  such  moneys;  and  in  event  of  a  bank  failure,  one  or  the 
other  must  stand  the  loss  thus  incurred.  When  this  con- 
dition exists  (and  great  care  should  be  exercised  by  agents 
and  solicitors  in  determining  this  fact),  the  surety  should 
never  execute  an  official's  bond,  where  the  statutory  form 
required  makes  it  guarantee  the  depository,  unless  the  official 
exacts  and  receives  indemnity  from  the  depository  to  hold 
him  harmless  in  the  event  of  failure.  This  indemnity  should 
be  in  the  form  of  corporate  surety.  The  bond  should  be 
so  drawn  as  to  run  to  the  official  and  the  surety  on  his 
official  bond,  and  should  be  held  by  the  latter  for  its  protec- 
tion in  event  of  trouble.  The  greatest  care  should  be  taken 
to  see  that  such  bond  is  for  an  amount  equal  to  the  largest 
sum  likely  to  be  on  deposit  at  any  one  time  to  the  credit 
of  the  official. 

The  importance  of  this  precaution  is  frequently  misunder- 
stood by  the  official  who  is  to  be  bonded,  but  as  it  is  as  much 
for  his  protection  as  that  of  his  surety,  his  co-operation 
should  be  readily  secured.  Solicitors  and  agents  will  find 
great  pressure  brought  to  bear  upon  the  officials  to  accept 
the  indemnity  of  the  directors  of  the  depository  selected. 
Experience  shows,  however,  thnt,  when  a  loss  occurs  by  failure, 

105 


FIDELITY  INSURANCE   AND   CORPORATE   SURETYSHIP. 

the  directors  are  generally  so  involved  in  the  defunct  insti- 
tution, that  the  indemnity  they  have  furnished  the  official 
for  the  protection  of  the  public  funds  is  valueless. 

SOME    OF    THE    HAZARDOUS    RISKS    OF    THIS    CLASS. 

There  are  numerous  public  officials  with  as  many  titles  and 
varying  greatly  in  hazard.  However,  from  the  discussion  of 
some  of  the  principal  risks  (see  below),  an  intelligent  idea 
may  be  formed  as  to  the  desirability  of  these  bonds,  regard- 
less of  the  title  of  the  individual  concerned. 

a — Tax  Collectors,  County  Treasurers,  or  Sheriffs  and  those 
who  "  ex  officio  "  Collect  Taxes. — This  is  considered  the  most 
hazardous  class  of  Public  Official  Bonds,  as  these  individuals 
not  only  handle  large  sums  of  money,  but  under  the  laws 
relating  to  their  duties  and  the  statutory  form  of  bond  re- 
quired, the  official  and  his  surety  are  also  frequently  liable 
for  all  uncollected  taxes,  unless  he  is,  or  can  be,  specifically 
relieved  from  this  by  law.  When  the  official  is  responsible 
for  such  uncollected  taxes,  inasmuch  as  failure  to  make  such 
collections  may  sometimes  not  be  caused  by  dishonesty,  it  is 
most  essential  that  the  applicant,  in  addition  to  satisfactorily 
passing  a  rigid  fidelity  investigation,  should  be  possessed 
of  sufficient  property  to  protect  the  surety  in  event  of  a  loss. 

When  a  county  treasurer  or  other  official  does  not  collect 
taxes,  but  is  merely  the  custodian  of  public  moneys,  the 
essential  qualifications  needed  to  make  the  risk  a  good  one 
are  integrity  and  business  capacity  sufficient  to  enable  him 
to  perform  properly  the  duties  of  his  position.  He  should, 
in  addition,  be  a  man  of  some  financial  resources. 

b — Sheriffs,  Constables,  etc.* — Among  the  several  classes  of 
officials,  who  are  looked  upon  with  more  or  less  disfavor  are 
sheriffs,  deputy  sheriffs  and  constables.  Such  appointees  are 
not,  as  a  rule,  of  such  standing  in  their  respective  com- 
munities as  to  make  them  desirable  risks.  This  condition 


*This  group  includes  any  official  with  authority  to  make  arrests  or  serve 
writs,  such  as  Game  Wardens,  Deputy  Fish  and  Game  Commissioners,  etc. 

106 


FIDELITY  INSUKANCE   AND   CORPORATE   SURETYSHIP. 

is  the  result  of  the  mode  of  appointing  these  public  officers. 
They  are  frequently  selected  more  on  account  of  their  personal 
characteristics  than  for  the  possession  of  the  specific  quali- 
fications essential  for  the  proper  discharge  of  the  duties  they 
are  obligated  to  perform.  The  result  of  this  is,  that  the  gen- 
eral standing  of  the  men  appointed  is,  as  a  rule,  not  as  high 
as  would  be  the  case  where  a  mercantile  or  manufacturing 
establishment  found  it  necessary  to  repose  the  same  responsi- 
bility in  an  employee. 

c — Holdovers  in  Office. — Much  confusion  has  been  caused 
among  agents  and  solicitors  by  the  fact  that  surety  companies 
do  not,  as  a  rule,  desire  to  issue  bonds  for  "  holdovers  "  in  office 
(an  official  elected  or  appointed  to  succeed  himself).  Though 
this  policy  seems  to  be  contrary  to  their  practice  when  viewing 
applicants  for  Fidelity  Bonds,  where  great  stress  is  laid  upon 
the  advantage  of  long  service,  experience  proves  that  most 
of  the  severe  losses  occasioned  on  bonds  of  this  class 
arise  on  those  officials,  who  are  bonded  for  a  term  sub- 
sequent to  that  of  their  first  election  or  appointment.  The 
difficulty  in  the  field,  and  the  misunderstanding  of  the  atti- 
tude of  the  surety  in  this  connection,  is  due  to  the  fact  that 
agents  do  not  always  comprehend  that  examination  of  losses 
show  that  "  holdovers  "  in  office,  who  are  dishonest,  and  who 
know  at  the  time  of  their  election  or  appointment  the  day 
upon  which  their  books  and  accounts  are  to  be  examined  and 
settlement  made  for  the  previous  term,  borrow  money  from 
their  friends  to  make  up  any  deficiency  at  the  time  of  the 
filing  of  the  new  bond,  and  then  pay  back  the  money  so  bor- 
rowed from  the  funds  for  which  the  second  bond  is  liable. 
In  such  cases  it  is  practically  impossible  for  the  surety  to 
prove  that  the  loss  occurred  prior  to  the  execution  of  the 
second  bond.  Again,  when  a  "  holdover  "  official  is  dishonest 
and  his  first  bond  has  been  furnished  by  friends,  he  will  fre- 
quently secure,  if  possible,  a  corporate  surety  bond  for  his 
other  term  of  office,  in  order  that  the  shortage  will  have  to 
be  borne  by  the  surety  company  and  not  his  friends. 

107 


FIDELITY  INSURANCE  AND  CORPORATE  SURETYSHIP. 

Therefore,  no  corporate  surety  bond  should  be  executed  to 
succeed  a  bond  or  bonds  previously  given  to  cover  the  term 
of  the  office  of  an  official.  The  hazard  is  great,  for  even 
though  the  latest  bond  may  be  given  only  for  a  term  of  one 
year  or  a  portion  of  that  period,  yet  the  surety  might  be 
called  upon  to  make  good  a  shortage  that  really  occurred 
prior  to  the  execution  of  its  bond,  because  of  the  difficulty 
of  proving  exactly  when  the  shortage  occurred.  This  prin- 
ciple of  underwriting  depends  somewhat  on  how,  and  under 
what  conditions,  the  funds  are  to  be  handled,  and  does  not 
apply  to  a  renewal  of  a  bond  by  the  surety  who  executed  the 
obligation  of  the  official  for  his  first  term  of  office. 

TERM  OF  AN  OFFICIAL  BOND. 

IB  order  to  avoid  misunderstanding  as  to  the  term  of  these 
bends,  it  may  be  well  to  state  that  when  a  statutory  form 
of  bond  is  executed,  the  surety  is  liable  under  the  original 
bond  for  the  full  term  of  office  for  which  the  official  is  elected 
or  appointed.  In  those  few  cases  where  the  bond  is  not  statu- 
tory in  form,  it  is  advisable  to  draw  it  for  an  annual  term 
with  a  cancellation  clause.  When  the  surety  executes  a 
statutory  form  of  bond,  it  is  bound  for  the  full  term  of  office, 
unless  by  statute  a  release  from  liability  can  be  secured  by 
means  of  a  petition  or  otherwise.  In  most  states,  however, 
there  is  no  such  provision. 

DIFFERENT  FROM  FIDELITY  BONDS. 
The  practice  of  surety  companies  in  handling  Public  Official 
Bonds  is  different  from  their  mode  of  treating  Fidelity  Bonds. 
A  return  premium  is  not  allowed  before  the  end  of  the  term 
for  which  bond  is  written,  unless  the  actual  instrument  or 
bond  is  returned  for  cancellation,  or  release  of  liability  se- 
cured in  writing  from  some  state,  county  or  municipal  officer 
empowered  with  authority  to  give  such  release;  for  even 
though  the  official  retires  from  his  position  during  his  term 
of  office,  as  long  as  the  bond  remains  on  file,  recovery  can  be 

108 


FIDELITY   INSURANCE    AND   CORPORATE   SURETYSHIP. 

obtained  (within  the  statutes  of  limitations)  from  the  surety 
in  the  event  of  a  subsequent  discovery  of  loss.  This  is  not 
the  case  in  the  ordinary  Fidelity  Bond,  which  limits  discovery 
of  loss  to  a  period  of  generally  six  months  after  the  retire- 
ment of  the  employee. 

We  have  seen  in  the  chapter  on  "  Fidelity  Bonds,"  that 
the  Employer's  Statement  is  the  warranty  or  the  contract  be- 
tween the  surety  and  the  assured;  while  in  the  judicial  cases 
(chap.  VII),  the  will,  deed  of  trust  or  other  instrument,  to- 
gether with  the  laws  applicable  to  this  class  of  business  are 
necessary  to  determine  the  conditions  under  which  the  ap- 
plicant is  to  perform  his  obligations.  In  the  case  of  Public 
Official  Bonds,  however,  it  is  not  necessary  to  execute  any 
additional  instrument,  for  the  reason  that  the  duties  and 
responsibilities  of  these  officers  are  determined  according  to 
the  laws  pertaining  to  them  in  the  different  states.  It  is 
most  desirable,  as  the  laws  in  the  various  states  differ  greatly, 
for  agents  and  solicitors,  when  submitting  bonds,  to  give  a 
digest  or  reference  to  the  laws  applicable  to  the  particular 
position  in  question  so  that  the  surety  may  have  exact  knowl- 
edge of  the  obligations  to  be  assumed  in  the  execution  of  the 
bond. 

THE  APPLICATION  AND  INFORMATION  DESIRED. 

In  order  to  explain  the  underwriting  features  of  the  most 
hazardous  classes  of  Public  Official  Bonds,  the  typical  ques- 
tions found  on  an  application  form  (see  Appendix,  page  220), 
are  given  below,  together  with  the  reasons  why  answers  to 
them  are  necessary.  In  addition  to  the  questions  necessary 
for  the  proper  drawing  of  the  bond,  such  as: 

1 — The  applicant's  name,  His  private  and  official  address, 
Exact  title  of  the  state,  county  or  municipal  government,  To 
whom  the  bond  is  to  be  given,  The  amount  of  bond,  Date  on 
which  bond  becomes  effective,  Official  title  of  the  applicant, 
Date  of  election  or  appointment,  Beginning  and  termination 
of  term  ,  the  applicant  is  also  aslced  to  state  his  com- 

109 


FIDELITY   INSURANCE    AND    CORPORATE    SURETYSHIP. 

pensation,  and  the  manner  of  its  payment.  This  is  desirable, 
as  very  frequently  it  will  be  ascertained  from  such  a  question 
that  the  compensation  of  the  official  is  insufficient  for  his 
support  and  those  that  may  be  dependent  upon  him,  even 
when  considering  his  income  from  sources  outside  of  his  offi- 
cial position.  This  additional  information  should  also  be 
elicited : 

2 — A  full  statement  of  the  duties  and  responsibilities  of  the 
office,  and  the  applicant's  knowledge  of  the  conditions  by 
which  his  official  acts  must  be  governed. 

The  information  thus  secured  has  great  bearing  upon  the 
desirability  of  the  risk  in  so  far  as  the  applicant's  ability 
to  properly  conduct  the  office,  from  a  business  point  of  view, 
is  concerned. 

3 — Does  the  applicant  collect  taaes?  and  if  so,  the  amount 
of  the  levy?  Liability  for  uncollected  taxes,  and  how  he  can 
be  relieved  of  such  responsibility. 

4 — The  approximate  amount  of  money  handled  during  the 
year,  with  month  in  which  receipts  are  largest;  the  amount 
of  money  apt  to  be  under  applicant's  control  at  any  time; 
the  length  of  such  control,  with  daily  average  handled. 

From  this  information  it  can  be  determined  whether  the 
amount  of  the  bond  is  large  enough  to  cover  the  largest 
amount  of  money  to  be  held  at  any  one  time.  An  idea  is 
given  of  what  that  amount  will  be,  with  the  conditions  under 
which  it  is  to  be  handled. 

5 — Where  the  funds  are  deposited  and  by  whom  the  deposi- 
tories are  designated.  Does  the  law  require  the  funds  to  be 
deposited  as  stated?  Is  the  applicant  responsible  for  the 
failure  of  the  depository  f  In  whose  name  are  the  deposits 
kept?  Are  the  funds  withdrawn  from  the  depository  by 
check  of  the  applicant?  If  so,  what  signature,  if  any,  is  re- 
quired f  Are  the  funds  paid  out  upon  the  warrants  of  other 
officials  f  and  if  so,  do  these  warrants  become  part  of  the 
checks  or  drafts  upon  the  depository? 

110 


FIDELITY  INSURANCE   AND   CORPORATE   SURETYSHIP. 

6 — When  the  applicant  is  required  to  make  reports.  To 
whom  are  such  made?  When  were  the  accounts  of  the  office 
last  examined?  Who  made  such  examinations?  When  is 
the  applicant  required  to  make  settlements  and  with  whom 
are  they  made? 

The  purpose  of  asking  such  questions  is  to  determine  to 
whom  the  reports  are  made,  and  what  system  has  been 
adopted  according  to  law  for  the  purpose  of  checking  up  and 
certifying  to  the  accounts  of  the  applicant.  It  is  important 
for  the  surety  that  a  verification  and  an  examination  of  the 
applicant's  accounts  should  be  made  at  frequent  intervals, 
and  it  reflects  greatly  upon  the  desirability  of  the  risk  if 
such  examinations  are  made  by  disinterested  auditors. 

7 — Has  the  applicant  previously  occupied  the  position  in 
question?  If  so,  during  what  period?  Who  then  furnished 
bond?  Why  change  is  now  desired?  Has  application  for  a 
surety  bond  ever  been  declined?  If  so,  by  what  company? 
with  reasons  for  such  declination. 

The  answers  to  these  questions  determine  whether  the 
applicant  is  a  holdover  in  office,  and  if  so,  whether  he  was 
bonded  previously  by  any  surety  company  in  his  position. 
If  such  is  the  case,  the  bond  is  undesirable.  If  the  bond  on 
behalf  of  the  applicant  has  been  declined  by  another  surety 
company,  it  is  most  desirable  to  ascertain  the  reason  for  such 
action. 

8 — Will  the  applicant  continue  in  any  business  or  employ- 
ment during  his  term  of  office?  If  so,  the  character  of  such 
business  and  the  probable  net  income  derived  from  the)  same. 

The  answers  to  these  questions  are  essential,  as  it  is  most 
important  for  the  surety  to  know  whether  the  applicant's 
remuneration  as  derived  from  his  official  position  and  private 
business  is  sufficient  for  his  support. 

There  is  considerable  latent  danger  in  the  bonding  of  any 
applicant  for  an  official  position,  who  is  to  continue  in  private 
business  or  employment  during  his  term  of  office,  as  experi- 
ence shows  it  is  not  an  infrequent  occurrence  in  losses  under 

111 


FIDELITY   INSURANCE   AND   CORPORATE    SURETYSHIP. 

these  bonds  for  the  applicant  to  have  appropriated  public 
funds  for  the  financing  of  his  own  business  enterprises.  This 
feature  of  the  underwriting  of  Official  Bonds  should  be  given 
due  consideration  in  determining  the  desirability  of  the  risk. 
9 — Financial  resources  of  applicant.  In  the  application 
form  (see  Appendix,  page  220),  from  which  the  questions 
above  referred  to  have  been  taken,  there  are  further  ques- 
tions which  bring  out  the  financial  resources  of  the  applicant, 
the  amount  of  life  insurance  he  carries,  etc. 

INDEMNITY  AGREEMENT. 

It  is  usual  for  the  applicant  for  an  Official  Bond  to  sign  an 
Indemnity  Agreement  which  is  attached  to  the  application  and 
on  which  questions  similar  to  those  above  considered  are 
asked.  In  connection  with  this  agreement,  it  is  important 
for  agents  and  solicitors  to  see  that  the  premium  to  be 
charged  and  the  method  of  paying  same  are  thoroughly  un- 
derstood by  the  applicant.  Most  companies  agree  under 
Official  Bonds,  when  the  term  of  office  is  two  years  or  more, 
to  allow  a  discount  of  10%  on  all  subsequent  premiums  after 
the  first  year's  charge,  if  such  premium  is  paid  in  advance 
for  the  entire  term.  When,  however,  the  premium  is  to  be 
paid  annually,  much  trouble  will  be  saved  the  agent  and 
solicitor  in  the  collection  of  subsequent  years'  premiums,  if 
this  part  of  the  Indemnity  Agreement  is  clearly  and  definitely 
understood. 

The  principal,  in  addition  to  agreeing  in  the  Indem- 
nity Agreement  that  he  will  pay  the  premium  and  hold 
the  surety  harmless  for  any  loss  that  may  be  sustained 
under  the  bond,  enters  into  a  further  contract  that  he 
will  furnish  the  surety  with  a  statement,  when  called  for, 
showing  all  the  receipts  and  disbursements  of  his  office,  the 
balances  on  hand,  and  in  bank,  together  with  certificates  from 
the  bank  or  banks  verifying  such  balances.  It  is  further 
agreed  by  the  individual  under  bond,  that  he  will  allow  a 
duly  authorized  representative  of  the  surety  to  examine  and 

112 


FIDELITY   INSURANCE    AND   CORPORATE    SURETYSHIP. 

check  up  his  accounts,  and,  in  addition,  that  he  will  render 
all  possible  assistance  in  connection  therewith.  Another 
clause  of  the  contract  is  that  the  principal  will  not  substi- 
tute another  bond  without  first  notifying  his  surety,  and 
furnishing  it  with  a  full  and  proper  release. 

BOND  FORMS. 

As  previously  stated,  the  form  of  bond  required  in  the 
obligations  treated  in  this  chapter  is  generally  fixed  by 
statutes,  ordinances,  etc.,  and  is  drawn  to  specifically  apply 
to  the  particular  position  to  be  filled  by  the  applicant. 


113 


CHAPTER  X. 

BONDS  GIVEN  TO  THE  UNITED  STATES 
GOVERNMENT  ON  BEHALF  OF  ITS  OFFI- 
CIALS AND  EMPLOYEES. 

In  order  to  avoid  any  misunderstanding  or  confusion,  it 
may  be  stated  that  the  officials  and  employees  of  both  the 
Internal  Revenue  and  Custom  House  service  are  included  in 
this  chapter.  Therefore,  care  should  be  taken  to  discriminate 
between  the  bonds  of  actual  officials  and  employees  of  the 
Government  and  those  which  are  filed  by  individuals  and 
corporations  not  in  the  Government  service,  but  transacting 
business  with  it.* 

The  bond  required  by  the  United  States  Government  has  an 
extremely  broad  scope,  and  covers  not  only  honesty,  but  also 
faithful  performance  of  duty.  Statistics  prove,  however,  that 
these  obligations  are  not  as  disastrous  as  similar  bonds  given 
on  behalf  of  state,  county,  and  city  officials,  due,  principally, 
to  the  very  superior  checking  system  in  vogue  throughout 
the  departments  of  the  Federal  Government.  The  knowl- 
edge by  the  officials  and  employees  of  the  strict  supervision 
the  Government  exercises  over  them,  and  the  fact  that  no 
expense  is  spared  in  the  apprehension  of  a  defaulter,  has  a 
very  strong  moral  effect.  In  addition  to  this,  the  necessity 
for  influence  and  recommendations  in  order  to  enable  officials 
and  employees  to  secure  appointments,  and  also  the  fact  that 
so  many  of  the  Government  positions  come  under  the  Civil 
Service  rule,  combine  with  the  above  features  to  render  the 
business  attractive  to  surety  companies.  This  is  reflected  in 
the  low  rate  of  premium  charged. 


*  See  Chapter  XI. 

114 


FIDELITY   INSURANCE   AND   CORPORATE    SURETYSHIP. 

Owing  to  the  numerous  classes  of  positions  in  the  Gov- 
ernment and  the  varying  conditions  of  employment,  this  par- 
ticular division  of  the  subject  will  be  treated  along  very 
general  lines.  However,  an  endeavor  will  be  made  to  give 
such  a  description  of  each  class  as  will  afford  an  intelligent 
idea  of  the  various  offices.  Government  business  under  this 
chapter,  as  a  general  rule,  is  desirable. 

INVESTIGATION    OF   APPLICANT   AND    BOND   FORMS. 

The  investigation  of  an  applicant  for  Government  service 
is  conducted  along  the  same  lines  as  has  been  outlined  in 
the  chapter  on  Fidelity  Bonds  (chap.  1).  The  Govern- 
ment issues  its  own  special  form  of  bond,  which  is  furnished 
when  the  appointment  is  made.  In  all  cases  it  is  necessary 
for  the  applicant  to  sign  such  bond.  Care  should  be  taken 
to  see  that  there  are  no  errors  or  erasures  and  that  the  bonds 
are  properly  and  neatly  signed,  or  they  will  not  be  accepted. 
In  filling  out  an  application  for  a  bond  to  the  Government,* 
the  applicant  must  give  his  full  name,  the  correct  title,  and 
the  exact  position  he  holds  under  the  Government,  as  the 
approving  officers  of  the  various  departments  are  very  strict 
in  having  accuracy  in  these  details. 

Each  individual  employee  is  obliged  to  give  a  separate  bond 
except  in  the  case  of  postoffice  employees,  when  the  Govern- 
ment will  accept  its  own  form  of  schedule  bond.  This  form, 
however,  must  be  treated  differently  from  that  of  the  regular 
Schedule  Bond  in  commercial  use,  as  the  Government  will  not 
permit  any  changes  in  it  except  the  removal  of  such  persons 
included  thereunder  as  may  be  transferred  or  leave  the  ser- 
vice. If  it  is  desired  to  cover  additional  employees  in  a 
postoffice  where  a  schedule  form  of  bond  has  been  issued,  an 
individual  bond  must  be  filed  by  each  new  employee. 

In  certain  cases  in  the  Government  service,  the  chief  official's 
bond,  which  runs  to  the  Government,  is  responsible  for  the 
acts  of  his  deputies  and  clerks.  In  such  cases  he  should,  of 

*  See  Appendix,  page  222. 

115 


FIDELITY  INSURANCE  AND  CORPORATE   SURETYSHIP. 

course,  protect  himself  by  exacting  bonds  from  his  sub- 
ordinates, and  care  should  be  taken  to  see  that  they  are  in 
sufficiently  large  amounts  to  protect  the  official  and  his  surety. 
In  some  instances  these  obligations  are  written  upon  the 
regular  schedule  forms  in  favor  of  the  chief  official  himself, 
and  the  bond  is  filed  with  him.  In  other  cases,  however, 
the  obligations  may  run  direct  to  the  Government  and  may 
be  filed  in  the  headquarters  of  the  department.  Where  such 
is  the  case,  the  bond  of  the  chief  official  is  not  as  desirable, 
since  he  is  still  responsible  for  the  acts  of  his  subordinates, 
and  recovery  can  be  made  for  him  upon  their  bonds  only  on 
the  initiative  of  the  Government. 

CLASSIFICATION  OF  EMPLOYEES  FURNISHING  BONDS. 

The  employees  of  the  Federal  Government  can  be   divided 

into  the  following  classes  for  the  purposes  of  this  chapter.* 

1 — EMPLOYEES    OF    THE    STATE    DEPARTMENT. 

a — U.  8.  Consul  Generals. — These  officials  are  appointed  by 
the  President  for  a  term  of  four  years,  subject  to  removal  at 
his  pleasure,  and  are  required  to  give  bond  in  varying 
amounts  according  to  the  importance  of  the  post  to  which 
they  are  assigned. 

b — Vice  and  Deputy  Consuls. — These  officials  are  appointed 
by  the  Secretary  of  State,  and  give  bond  in  the  sum  of  $2,000. 

c — U.  S.  Marshals  (Consular  Courts). — There  are  only 
three  of  these  officials  who  are  located  in  foreign  ports. 

The  other  officials  who  are  required  to  give  bonds  are  located 
in  Washington. 

2 — EMPLOYEES   OF   THE   TREASURY   DEPARTMENT. 

In  this  department  there  are  a  number  of  officials  and 
employees  who  are  required  to  file  bonds  in  favor  of  the 
Government. 


*  Many  of  the  bonds  needed  are  to  cover  Government  positions 
only  in  Washington,  and  they  are  not  deemed  of  sufficient  interest  to 
be  treated  at  length  in  a  book  of  this  character.  The  principal  em- 
ployees only  are  treated  in  this  chapter. 

116 


FIDELITY   INSURANCE   AND  CORPOBATE   SURETYSHIP. 

a — Assistant  Treasurers. — In  each  of  the  nine  Sub-Treas- 
uries there  is  an  Assistant  Treasurer.  These  officials  hold 
office  for  a  term  of  four  years,  and  must  furnish  bonds  from 
$150,000  to  $600,000. 

b — Mint  Officers. — At  the  various  Mints,  there  are  eighteen 
officers  who  are  appointed  for  unlimited  terms.  They  are 
required  to  give  bonds  varying  from  $10,000  to  $100,000. 

c — Assay  Officers. — There  are  nine  Assay  Officers  holding 
office  for  an  indefinite  period,  who  are  required  to  give  bonds 
in  amounts  varying  from  $10,000  to  $50,000. 

d — Superintendent  of  Construction  of  Public  Buildings. — 
Wherever  there  is  a  Dublic  building  in  course  of  erection, 
there  is  a  Superintendent  of  Construction,  usually  a  local 
man,  whose  tenure  of  office  is  unlimited,  and  who  is  required 
to  give  bond  in  an  adequate  sum. 

e — Collectors  of  Customs. — In  each  Custom  House  there  is 
a  Collector,  who  serves  for  a  term  of  four  years  and  who 
gives  two  bonds.  One  covers  the  duties  of  his  office  as  Col- 
lector of  Customs,  and  the  other,  the  disbursement  of 
money  which  he  may  make  as  a  Special  Disbursing  Officer. 
The  former  bond  is  required  by  the  United  States  Statutes, 
and  the  latter  is  demanded  by  the  Government  to  cover  dis- 
bursements of  collections  in  connection  with  his  office. 

f — Surveyors  of  Customs. — There  are  forty-seven  Surveyors 
of  Customs,  who  hold  office  for  a  term  of  four  years,  and 
furnish  bonds  from  $1,000  to  $150,000. 

g — Naval  Officers  of  Customs. — There  are  seven  of  these 
officials  located  in  the  larger  ports,  who  are  required  to  fur- 
nish bond  to  the  U.  S.  Government  in  penalty  of  $10,000  to 
$20,000. 

h — General  Appraisers  (Customs). — General  Appraisers 
(Customs)  hold  office  for  an  indefinite  term  and  are  many  in 
number.  The  amounts  of  their  bonds  vary. 

i — Internal  Revenue  Collectors. — In  each  Internal  Revenue 
District  there  is  a  collector,  who  is  required  to  give  two  bonds, 
one  as  Collector  and  one  as  Disbursing  Agent.  The  term  of 
office  of  these  officials  is  unlimited. 

117 


FIDELITY  INSURANCE   AND   CORPORATE    SURETYSHIP. 

j — Deputy  Collectors  of  Internal  Revenue. — These  officials 
are  bonded  in  favor  of  the  Collectors  of  Internal  Revenue. 
Care  should  be  taken  to  see  that  the  obligations  are  made  suf- 
ficiently large  to  properly  protect  the  Revenue  Collector  and 
his  surety  in  case  of  loss. 

k — Storekeepers-Gangers. — These  Government  officials  are 
required  to  file  bond  in  penalties  ranging  from  $5,000  to 
$10,000.  There  are  quite  a  number  of  these  in  each  Internal 
Revenue  District  who  are  bonded  direct  to  the  Government. 
Formerly  there  were  two  distinct  positions,  but  recently  the 
duties  of  Storekeeper  and  Gauger  have  been  merged,  and  the 
bond  covers,  in  addition  to  the  usual  provisions,  the  perform- 
ance of  the  duties  of  the  dual  offices.  Owing  to  a  recent 
change  in  the  form  of  bond  required  of  these  officials,  the 
hazard  of  these  risks  has  been  very  materially  increased. 

3 — EMPLOYEES   OF   THE  WAR  DEPARTMENT. 

There  are  very  few  bonds  required  of  the  officials  and 
employees  in  this  department.  Those  most  generally  found 
are: 

a — Assistant  Paymaster  General. — There  are  three  Assist- 
ant Paymasters  General  in  the  Army  with  the  rank  of  Colonel, 
each  of  whom  is  required  to  give  bond  in  the  penalty  of 
$25,000. 

b — Deputy  Paymasters  General. — There  are  four  Deputy 
Paymasters  General  in  the  Army,  with  the  rank  of  Lieuten- 
ant-Colonel, who  are  required  to  give  bond  in  the  penalty  of 
$25,000. 

c — Paymasters. — There  are  in  the  Army  twenty  Paymasters 
ranked  as  Major,  bonded  in  the  sum  of  $50,000,  and  twenty- 
five  Paymasters  ranked  as  Captain,  bonded  in  sums  rang- 
ing from  $25,000  to  $50,000. 

e — Commissary  and  Assistant  Commissaries  of  Subsistence. 
— In  the  Subsistence  Department  of  the  Army  there  are: 
Three  Commissaries- General  with  rank  of  Colonel,  bonded  for 
$25,000  each;  four  Deputy  Commissaries-General  with  rank 

118 


FIDELITY   INSURANCE   AND   CORPORATE    SURETYSHIP. 

of  Lieutenant- Colonel,  bonded  for  $20,000  each;  nine  Com- 
missaries with  rank  of  Major,  bonded  for  $20,000  each;  twenty- 
seven  Commissaries  with  rank  of  Captain,  bonded  for  $15,000 
each. 

4 — EMPLOYEES    OF    THE    DEPARTMENT    OF    JUSTICE. 

In  the  Department  of  Justice  are  a  number  of  officials,  who, 
in  nearly  every  instance,  serve  at  the  pleasure  of  the  Presi- 
dent and  who  are  required  to  be  bonded.  The  bonds  are 
written  for  a  term  of  four  years  and  are  considered  desirable 
risks. 

a — Disbursing  Officers. — There  are  quite  a  number  of  these 
officials,  who  are  required  to  give  bond  in  sums  varying  from 
$5,000  to  $40,000. 

b — Circuit  Court  of  Appeal  Clerks. — There  are  nine  of  these 
Clerks,  who  may  be  required  by  rule  of  Court  to  give  bond. 

c — U.  8.  District  and  Circuit  Court  Clerks. — In  each  Judi- 
cial District  in  the  United  States  are  employees  known  as  Dis- 
trict and  Circuit  Clerks.  They  are  required  to  give  bond 
in  sums  from  $5,000  to  $20,000. 

e — U.  8.  Commerce  Court  Clerks. — This  tribunal  is  provided 
for  by  the  Act  of  Congress  approved  on  June  18,  1910.  The 
Clerk,  Deputy  Clerk,  etc.,  are  bonded  in  varying  amounts. 

f — U.  S.  Marshals. — There  are  a  number  of  U.  S.  Marshals 
at  various  points.  They  are  required  to  give  bond  in  sums  of 
$20,000  to  $40,000. 

g — U.  S.  Deputy  Marshals. — United  States  Marshals  have 
under  them  Deputy  Marshals,  and  as  the  bond  of  the  Marshal 
makes  him  responsible  for  the  acts  of  his  deputies,  he  should 
require  them  to  furnish  bonds  running  to  himself,  the  penalty 
of  which  should  be  fixed  by  him  in  an  amount  sufficient  to 
protect  him  under  his  bond.  In  such  cases  a  form  of  bond 
covering  larceny  or  embezzlement  may  be  used.  It  can  be 
written  on  a  Schedule  form  covering  the  entire  force  of 
deputies. 

h — Other  Officials  Requiring  Bonds  in  this  Class  are  Located 
at  Washington. 

119 


FIDELITY   INSURANCE   AND   CORPORATE    SURETYSHIP. 
5 THE   EMPLOYEES   OF    THE    POST    OFFICE   DEPARTMENT. 

This  department  has  charge  of  the  post  offices,  postal  ser- 
vice, and  the  handling  and  transportation  of  mail.  The  bonds 
required  for  these  purposes  are  numerous,  and  as  a  class 
they  are  considered  good  business. 

a — Postmasters. — All  Postmasters  of  the  first,  second,  third 
and  fourth  classes  are  appointed  by  the  President,  and  hold 
office  for  a  term  of  four  years,  unless  sooner  removed  or  sus- 
pended. Until  a  recent  ruling  of  the  Post  Office  Department  the 
Government  would  not  accept  corporate  surety  alone  in  these 
four  classes,  requiring  in  addition  thereto  individual  sureties, 
at  least  two  of  whom  were  resident  patrons  of  the  post  office 
in  question.  The  reason  for  this  was  that  in  case  of  death 
or  removal  from  office  of  the  Postmaster,  the  sureties  had  to 
select  one  of  their  number  to  act  as  Postmaster  until  an- 
other appointment  could  be  made.  Now  this  has  been  changed, 
and  sole  corporate  surety  is  accepted  in  all  Postmaster's  bonds. 

As  surety  companies  look  upon  the  risks  of  Postmasters 
favorably,  they  issue  a  form  of  bond  running  to  the  individual 
sureties,  if  they  have  furnished  the  Postmasters'  bond,  in- 
demnifying them  from  any  loss  that  they  may  sustain  by 
leason  of  their  obligation.  This  is  called  a  Re-indemnifying 
Bond.  This  fact  should  be  borne  in  mind  by  agents,  so  that, 
when  a  postmaster  is  appointed  by  the  President  in  any  of 
the  above  classes,  an  endeavor  may  be  made  to  secure  the 
Re-indemnifying  Bonds  in  favor  of  the  personal  sureties. 

b — Post  Office  Clerks. — In  every  post  office,  particularly  in 
cities  of  any  size,  there  are  a  number  of  clerks;  such  as 
Assistant  Postmasters,  clerks  in  the  Money  Order,  Registry 
and  Stamp  Divisions,  as  well  as  those  attending  to  the  inside 
clerical  work  of  the  office,  who  are  required  to  give  bond 
varying  in  penalty  from  $1,000  to  $5,000.  Corporate  surety 
in  such  instances  is  acceptable  to  the  Government. 

Clerks  in  charge  of  substations  are  included  in  the  class 
of  clerks  in  post  offices.  They  are  required  to  give  bond 

120 


FIDELITY  INSURANCE   AND   CORPORATE    SURETYSHIP. 

direct  to  the  Government  in  the  sum  of  $5,000.  If  there 
are  any  additional  clerks  in  the  substation,  the  chief  clerk 
in  charge  is  responsible  under  his  bond  to  the  Government 
for  the  acts  of  his  subordinates,  and  he  should,  and  usually 
does,  require  all  sub-clerks  to  give  bonds  in  his  favor  in  his 
official  capacity.  These  bonds  can  be  written  on  a  form  of 
bond  covering  larceny  or  embezzlement. 

c — Post  Office  Inspectors. — In  the  postal  service  there  are 
many  hundreds  of  Post  Office  Inspectors,  who  are  appointed 
by  the  Postmaster-General.  They  are  required  to  file  bond 
in  the  sum  of  $5,000. 

d — Railroad  Postal  Clerks. — These  employees  have  charge  of 
the  handling  of  mail  on  the  various  transportation  companies, 
and  are  required  to  file  bonds  in  the  penalty  of  $1,000. 

e — Star  Route  Contractors. — Under  this  head  are  included 
those  bonds  which  are  required  of  Star  Route  contractors  who 
agree  to  carry  mail  between  distant  points.  This  should  be 
properly  classed  as  contract  business,  and  the  experience  of 
surety  companies  has  shown  it  to  be  so  hazardous  that  prac- 
tically all  have  discontinued  writing  this  obligation.  (See 
Miscellaneous  Contract  Bonds,  ch.  V.) 

f — Letter  Carriers. — All  regular  and  substitute  letter  car- 
riers are  required  to  file  bond  in  the  penalty  of  $1,000,  and  in 
the  outlying  or  country  districts,  all  rural  and  substitute 
rural  letter  carriers  appointed  afe  compelled  to  file  bonds 
in  the  sum  of  $500  each.  There  are  thousands  of  these  em- 
ployees, and  the  risks  are  considered  desirable,  provided  a 
proper  rate  can  be  secured. 

6 — EMPLOYEES  OF  THE  NAVY  DEPARTMENT. 

In  this  department  of  the  Federal  Service  there  are  many 
bonds  required  of  the  various  officials.  The  majority  of  these 
employees  are  appointed  by  the  President  for  an  indefinite 
term,  but  the  bonds  are  written  for  periods  of  four  years. 

121 


FIDELITY  INSURANCE   AND   CORPORATE    SURETYSHIP. 

a — Assistant  Paymasters. — There  are  sixty- five  Assistant 
Paymasters  in  the  Navy,  and  each  is  required  to  give  bond  in 
the  sum  of  $10,000. 

b — Passed  Assistant  Paymasters. — There  are  thirty  Passed 
Assistant  Paymasters  in  the  Navy,  each  being  required  to  file 
bond  in  the  sum  of  $15,000. 

c — Paymasters. — There  are  seventy-six  Paymasters  in  the 
Navy;  five  holding  rank  of  Lieutenant-Commander,  and 
seventy-one  the  rank  of  Lieutenant.  Paymasters  are  required 
to  give  bond  in  the  sum  of  $25,000. 

d — Pay  Inspectors. — There  are  fifteen  Pay  Inspectors  in  the 
Navy,  each  of  whom  is  required  to  give  bond  in  the  sum  of 
$25,000. 

e — Pay  Directors. — There  are  fourteen  Pay  Directors  in  the 
Navy,  each  of  whom  is  required  to  give  bond  in  the  sum  of 
$25,000. 

f — Assistant  Quartermasters  (Marine  Corps). — There  are 
eleven  Assistant  Quartermasters  in  the  Pay  Department  of  the 
Marine  Corps,  who  are  required  to  give  bond  in  various 
amounts  ranging  from  $10,000  to  $30,000,  according  to  grade. 

g — Paymasters  (Marine  Corps). — There  are  in  the  Marine 
Corps  one  Paymaster  with  rank  of  Colonel  (bond  required 
$30,000)  ;  three  Assistant  Paymasters,  one  with  rank  of  Lieu- 
tenant-Colonel (bond  required  $25,000),  one  with  rank  of 
Major  (bond  required  $20,000),  and  one  with  rank  of  Captain 
(bond  required  $20,000). 

7 — EMPLOYEES    OF    THE    DEPARTMENT    OF    THE    INTERIOR. 

All  appointments  in  the  Department  of  the  Interior  are 
made  by  the  President  for  a  term  of  four  years  unless  other- 
wise specified. 

a — Receivers  of  Public  Money. — There  are  over  100  Receivers 
of  Public  Money  in  the  service  of  the  U.  S.  Government,  one 
being  stationed  wherever  there  is  a  Register  of  the  General 
Land  Office.  The  amounts  of  the  bonds  required  from  them 

122 


FIDELITY   INSURANCE   AND   CORPORATE    SURETYSHIP. 

vary,  depending  upon  the  importance  of  the  station  and  the 
amount  of  money  received. 

b — Registers  of  the  Land  Office. — There  are  104  of  these 
employees,  each  of  whom  is  required  to  file  bond  in  the  penalty 
of  $10,000. 

c — Special  Agents. — There  are  seventy-five  Special  Ag«  ,ts  in 
the  General  Land  Office,  and  six  Special  Agents  in  the  Indian 
Office,  all  of  whom  are  bonded  in  varying  amounts.  They 
are  appointed  by  the  Secretary  of  the  Interior  for  an  indefinite 
period,  and  are  detailed  for  special  work  in  the  field,  being 
usually  connected  with,  or  attached  to  the  Land  Office  in 
cities  of  the  West. 

d — Indian  Agents. — There  is  an  Indian  Agent  at  each  of  the 
several  Indian  agencies  throughout  the  country,  who  is  ap- 
pointed by  the  President  for  a  term  of  four  years.  In  many 
cases  these  risks  are  hazardous,  and  should  be  scrutinized 
most  carefully  on  account  of  the  various  conditions  under 
which  these  employees  handle  money. 

e — Surveyors-General. — There  are  seventeen  Surveyors-Gen- 
eral required  to  give  bond. 

f — Pension  Agents. — There  are  eighteen  Pension  Agents  sta- 
tioned in  the  principal  cities  of  the  country,  who  are  required 
to  give  bond.  As  all  payments  are  made  by  check,  the  danger 
of  these  bonds  lies  in  the  fact  that  fraud  may  be  perpetrated 
in  the  preparation  of  the  pension  papers. 

g — Special  Disbursing  Agents  (Geological  Survey). — The 
Secretary  of  the  Interior  designates,  from  time  to  time  cer- 
tain employees  of  the  Geological  Survey  for  service  as  Special 
Disbursing  Agents,  who  then  have  to  give  bond. 

8 — EMPLOYEES    OF    THE    DEPARTMENT    OF     AGRICULTURE. 

Very  few  of  the  officials  and  employees  of  this  department 
are  required  to  give  bond.  The  only  ones  of  interest  to 
agents  are  the  Temporary  Disbursing  Agents,  who  are  scat- 

123 


FIDELITY   INSURANCE   AND    CORPORATE    SURETYSHIP. 

tered   over  the   country,   as  they   are   required  to   file  bonds 
ranging  from  $2,000  to  $5,000. 

All  other  officials  and  employees  are  located  at  Washington. 

9 EMPLOYEES    OF   THE    DEPARTMENT    OF    COMMERCE    AND    LABOR. 

Officers  and  employees  of  this  department  required  to  give 
bond  in  favor  of  the  Government  are  summarized  as  follows. 

a — Special  Disbursing  Agents. — These  agents  are  chosen  by 
the  Secretary  from  among  persons  already  in  the  public  ser- 
vice. They  are  usually  appointed  at  remote  stations  in  the 
outside  service,  or  from  officers  whose  duties  require  them  to 
perform  continuous  travel. 

b — Chiefs  of  Parties  in  the  Coast  and  Geodetic  Survey. — 
Bonds  for  these  officials  are  given  in  order  that  the  employees 
may  receive  advances  of  public  funds.  There  are  about 
seventy- five  of  these  officers  designated  each  year. 

c — U.  S.  Shipping  Commissioners. — These  officers  are  found 
in  most  all  of  the  ports  of  any  size.  Their  number  and  the 
amount  of  their  bond  varies  in  many  instances. 


124 


CHAPTER  XI. 

INTERNAL  REVENUE  AND  CUSTOMS  BONDS 
GIVEN  TO  THE  UNITED  STATES  GOV- 
ERNMENT. 

The  bonds  treated  in  this  chapter  are  those  which  are  given 
by  individuals,  firms  or  corporations  transacting  any  busi- 
ness upon  which  taxes  are  levied,  to  comply  with  the  Customs 
and  Internal  Revenue  laws  and  regulations. 

This  particular  class  of  bonds  must  not  be  confused  with 
those  explained  in  the  chapters  on  Contract  Constructural  and 
Supply  Bonds  ( running  to  the  Government ) ,  and  Bonds 
Given  to  the  United  States  Government  on  Behalf  of  its  Offi- 
cials and  Employees. 

WHAT  THE  BOND  GUARANTEES. 

All  business  transacted  within  the  limits  of  the  United 
States,  which  contributes  in  any  way  to  the  income  of  the 
Federal  Government,  is  subject  to  the  Internal  Revenue  or 
Customs  laws  and  regulations.  In  order  to  interfere  as  little 
as  possible  with  the  conduct  of  such  business,  it  is  possible, 
in  a  great  many  instances  to  file  a  bond  with  the  Govern- 
ment, which  in  a  large  measure  facilitates  the  business  in 
question  and  the  work  of  the  Federal  officers,  making  their 
relations  less  troublesome  than  if  the  Government  were  obliged 
to  exercise  minute  supervision  over  them.  Bonds  of  this 
kind,  therefore,  guarantee  the  honesty  of  the  principal  and 
compliance  with  such  regulations  as  relate  to  the  particular 
business,  as  well  as  furnish  the  Government  with  security 
that  its  revenue  will  be  properly  collected  and  that  its  laws 
will  be  followed,  or  that  it  will  be  compensated  for  any  breach 
of  the  same. 

125 


FIDELITY   INSURANCE   AND    CORPORATE    SURETYSHIP. 

In  most  cases  the  liability  is  slight  since  the  penalty  for 
an  infraction  of  the  Federal  law  is  great  and  generally  means 
refusal  on  the  part  of  the  Government  to  permit  the  offender 
to  continue  in  business.  Furthermore,  fines  and  penalties 
are  exacted,  as  a  rule,  and  criminal  prosecution  must  be 
resorted  to,  in  some  cases,  before  any  liability  devolves  upon 
the  surety.  This  of  course  minimizes  the  chance  of  loss. 

Through  failure  to  understand  properly  the  Internal  Rev- 
enue laws  or  from  accident  or  carelessness,  assessments 
may  be  levied  against  distillers,  brewers,  tobacco,  cigar 
manufacturers,  etc.,  which  are  in  the  nature  of  judgments 
and  become  liens  upon  the  premises  or  property  of  the  prin- 
cipal until  paid  or  satisfied.  In  such  minor  cases  if  the 
principal  is  reliable  and  responsible,  these  liens  are  promptly 
met  and  the  surety's  interests  are  protected.  Where  the 
offense  is  greater  and  the  responsibility  of  the  principal  less, 
the  surety  will  probably  meet  with  loss.  These  bonds,  there- 
fore, must  be  underwritten  upon  the  same  general  lines  as 
any  other  class  of  bonds.  The  moral  and  financial  standing 
of  the  principal  are  the  important  features  and  must  be  un- 
questioned to  make  this  business  desirable. 

CLASSIFICATION  OF  THE  BONDS. 

1 — INTERNAL  REVENUE  BONDS. 

Form  No.  3* — Distillers  Leaseholders. — Bonds  of  this  class 
are  now  seldom  used,  as  they  only  apply  to  distilleries  and 
improvements  thereto  which  were  erected  prior  to  July  20, 
1868. 

Form  No.  20 — Brewers. — This  form  of  bond  is  required  to 
be  filed  at  the  time  a  brewer  commences  to  transact  business 
and  must  be  renewed  every  four  years  from  that  date.  The 
bond  is  general  in  character  and  guarantees  that  the  brewer 
will  comply  with  the  Internal  Revenue  requirements. 


*  These   numbers    represent    the    government's    designation    of    the 
bond    form. 

126 


FIDELITY  INSURANCE  AND   CORPORATE   SURETYSHIP. 

Form  No.  30 — Annual  Distillers. — By  referring  to  this  bond 
it  will  be  noted  that  it  is  given  to  comply  with  the  require- 
ments of  the  Internal  Revenue  Department,  and  must  be 
taken  out  by  all  distillers  on  May  1st  of  each  year.  It  is, 
therefore,  an  annual  bond. 

Form  No.  30% — Fruit  Distillers. — This  bond  is  similar  in 
kind  to  Form  No.  30,  except  that  it  is  drawn  to  cover  the  dis- 
tilling of  fruit.  It  is  an  annual  bond  and  is  taken  out  each 
year  on  May  1st.  Except  on  large  and  well-established  dis- 
tilleries this  business  is  hazardous. 

Form  No.  40 — Tobacco  Manufacturers. — Every  manufac- 
turer of  tobacco  or  snuff,  before  commencing  business,  must 
give  a  bond  on  Form  No.  40  in  a  penal  sum  of  not  less  than 
$2,000  nor  more  than  $20,000,  to  be  fixed  by  the  Collector 
according  to  the  quantum  of  business  proposed  to  be  done 
by  the  manufacturer.  The  bond  is  continuous  in  form,  and 
additional  bonds  must  be  taken  out  from  time  to  time  as  the 
manufacturer  increases  his  number  of  hands  or  enlarges  hia 
plant. 

Form  No.  71 — Cigar  Manufacturers. — Every  manufacturer 
of  cigars  or  cigarettes,  before  commencing  such  manufacture 
must  execute  a  bond  in  the  penal  sum  of  not  less  than  $200, 
to  be  approved  by  the  Collector;  and  such  bond  must  be 
executed  on  Form  No.  71.  The  sum  of  the  same  may  be 
increased  from  time  to  time  and  additional  bond  required 
as  the  manufacturer's  business  increases. 

The  total  penalty  of  these  bonds  is  as  follows:  from  one 
to  three  cigarmakers  (meaning  where  from  one  to  three  are 
employed),  $200;  from  four  to  eight,  $500;  from  nine  to 
fifteen,  $1,000;  from  sixteen  to  twenty- five,  $2,000;  from 
twenty-six  to  fifty,  $3,000;  and  for  more  than  fifty,  $5,000. 
Cigar  manufacturers  are  required  to  keep  a  special  set  of 
books,  which  must  balance  with  those  of  the  Collector.  If 
this  is  not  done  the  manufacturer  and  his  surety  are  respon- 
sible for  any  discrepancies.  This  balancing  of  books  only 
has  reference  to  the  number  of  pounds  of  tobacco  received 

127 


FIDELITY   INSURANCE   AND    CORPORATE    SURETYSHIP. 

and  made  into  cigars,  and  is  for  the  purpose  of  ensuring  the 
collecting  of  the  tax  on  the  same. 

As  there  are  many  thousands  of  cigar  manufacturers  scat- 
tered over  the  country,  this  is  a  very  common  obligation, 
and  is  considered  good  business  if  the  applicant  stands  well 
morally  and  financially. 

Form  No.  80 — Distillers  Monthly  Warehousing. — Every  dis- 
tiller, having  a  distillery  warehouse,  except  as  covered  fully 
under  Form  No.  359,  is  required  to  file  a  Monthly  Warehous- 
ing Bond  by  the  sixth  of  each  month,  guaranteeing  the  tax 
on  the  spirits  distilled  in  the  month  preceding.  The  tax  at 
present  is  fixed  at  $1.10  per  gallon.  The  penalty  of  the  bond, 
therefore,  is  fixed  by  the  Internal  Revenue  Department  by 
multiplying  the  gallons  distilled  by  $1.10. 

The  liability  of  this  bond  is  in  force  until  the  tax  is  paid 
and,  therefore,  can  be  effective  for  several  years,  depending 
on  the  time  that  the  spirits  remain  in  the  bonded  warehouse. 
This  time  is  limited  by  law  to  eight  years  from  the  date  of 
the  entry  of  the  spirits  for  deposit. 

Form  No.  Ill — Tobacco  Peddler. — Every  peddler  of  tobacco 
before  commencing,  or  if  he  has  already  commenced  before 
continuing,  to  peddle  tobacco,  must  furnish  to  the  Collector 
of  his  district  an  approved  bond  in  the  sum  of  $500.  This 
is  conditioned  on  the  .  fact  that  the  peddlar  will  not  engage 
in  any  attempt,  by  himself  or  by  collusion  with  others,  to 
defraud  the  Government  of  any  tax  on  tobacco,snuff  or  cigars ; 
that  he  will  neither  sell  nor  offer  for  sale  any  tobacco,  snuff 
or  cigars  not  in  the  original  and  full  packages  (which  is 
required  by  law)  and  only  in  such  packages  as  bear  the 
manufacturer's  label  or  caution  notice,  his  legal  marks  and 
brands,  together  with  genuine  internal  revenue  stamps  which 
have  never  before  been  used.  In  case  of  a  firm  each  member 
must  give  bond. 

As  many  manufacturers  of  tobacco  products  have  traveling 
salesmen  who  come  under  this  ruling,  it  is  well  for  the  agents 
to  get  in  touch  with  such  manufacturers. 

128 


FIDELITY   INSURANCE   AND   CORPORATE    SURETYSHIP. 

Form  No.  214 — Oleomargarine  Manufacturers. — Every 
manufacturer  of  oleomargarine  before  commencing  business  is 
required  to  file  with  the  Collector  of  the  district  in  which  his 
factory  is  located  a  bond  in  an  amount  to  be  fixed  by  the 
collector  of  not  less  than  $5,000.  This  is  a  continuing  form 
and  the  bond  is  conditioned  upon  a  compliance  with  the  laws 
and  regulations  relating  to  the  general  subject. 

Form  No.  220. — Exporters  of  Oleomargarine,  etc. — This  form 
of  bond  is  used  by  exporters  of  all  articles  ( other  than  distilled 
spirits  and  fermented  liquors)  withdrawn  free  of  tax  or  with 
allowance  of  drawback  under  the  Internal  Revenue  laws. 
It  is  applicable  to  oleomargarine  and  adulterated  butter, 
which  may  be  withdrawn  free  of  tax  for  export  to  a  foreign 
country.  Credit  is  allowed  thereon  upon  presentation  of  evi- 
dence of  the  landing  abroad  of  the  goods.  The  penal  sum  of 
this  obligation  must  be  double  the  amount  of  estimated  tax 
which  will  at  any  time  constitute  a  charge  against  such  bond. 

Other  Export  Bonds. — In  addition  to  the  bond  immediately 
preceding,  other  Export  Bonds  are  required,  the  conditions 
of  which  are  similar  to  and  the  penalties  on  the  same  de- 
termined in  the  same  manner  as  those  for  Export  of  Oleo- 
margarine Free  of  Tax.  They  are  as  follows: — 

a — Form  "  B  " — For  direct  export  of  distilled  spirits. 

b — Form  "  BB  " — For  transportation  for  export  of  distilled 
spirits. 

c — Form  "  A  No.  263  " — For  export  of  fermented  liquors. 

d — Form  "  A  No.  549  " — For  removal  for  export  of  all  arti- 
cles other  than  distilled  spirits  and  fermented  liquors,  in- 
cluding tobacco,  snuff,  cigars,  mixed  flour,  playing  cards,  etc. 

Form  No.  235 — Transportation  and  Warehouse  for  Fruit 
Brandy  to  be  deposited  in  Special  Bonded  Warehouse. — This 
bond  is  similar  to  No.  351  mentioned  below,  except  that  it 
applies  to  fruit  brandy. 

Form  No.  256 — Winemaker's  Bond. — This  bond  is  a  trans- 
portation as  well  as  a  winemaker's  bond,  and  is  conditioned 

129 


FIDELITY   INSURANCE    AND   CORPORATE    SURETYSHIP. 

for  the  safe  transportation  of  the  brandy  from  the  place  of 
production  or  deposit  to  the  winery  where  it  is  to  be  used, 
as  well  as  for  the  use  of  such  brandy  in  the  fortification  of 
legitimate  wines  (as  defined  by  Internal  Revenue  regula- 
tions). The  bond  also  covers  the  payment  of  all  fines  im- 
posed and  penalties  incurred  and,  in  addition,  payment  of 
the  charge  of  three  cents  for  each  tax  gallon  of  brandy  used 
in  the  fortification  of  sweet  wines. 

This  obligation  must  be  given  by  any  producer  of  pure 
sweet  wines,  who  desires  to  fortify  the  same  either  with  grape 
brandy  produced  by  himself  or  with  grape  brandy  deposited 
in  any  special  bonded  warehouse  free  of  tax. 

The  penalty  of  the  bond  will  be  sufficiently  large  to  cover 
the  amount  of  the  Internal  Revenue  tax  on  the  brandy  charge- 
able to  the  bond  during  any  one  month,  and  for  not  less  than 
$500  nor  more  than  $100,000. 

Form  No.  263 — Export  for  Fermented  Liquor. — Bonds  of 
this  class  are  required  to  be  given  by  brewers  exporting  fer- 
mented liquor  free  of  tax,  and  in  a  penal  sum  of  not  less 
than  double  the  tax  on  the  estimated  quantity  of  liquor  to 
be  removed  for  export  during  a  period  of  three  months;  in 
no  case  is  the  penalty  less  than  $1,000.  These  bonds  remain 
in  force  until  they  are  renewed  or  are  otherwise  cancelled. 

Form  No.  269 — Smoking  Opium  Manufacturer. — Every 
manufacturer  of  opium  for  smoking  purposes  is  required  to 
file  bond,  at  the  time  he  applies  for  a  license  to  conduct  this 
business,  in  the  Internal  Revenue  Department,  which  guaran- 
tees that  he  will  comply  with  all  requirements  as  to  the 
manufacture  of  this  article.  The  penalty  of  these  bonds  is 
fixed  by  the  department.  They  are  practically  obsolete,  as 
the  manufacture  of  this  article  is  now  prohibited  by  law. 

Form  No.  351 — Transportation  from  Warehouse  to  General 
Bonded  Warehouse. — This  bond  is  required  of  all  distillers 
intending  to  transfer  spirits  to  a  general  bonded  warehouse. 
The  penalty  is  fixed  by  the  department  on  the  basis  of  $1.10 
multiplied  by  the  estimated  number  of  gallons  to  be  trans- 

130 


FIDELITY  INSURANCE  AND   CORPORATE   SURETYSHIP. 

ported  from  the  distiller's  warehouse  to  the  general  bonded 
warehouse  during  the  fiscal  year  for  which  the  bond  is  given. 

The  form  is  conditioned  for  the  safe  transportation  of  the 
spirits  to,  and  their  storage  in,  the  designated  warehouse, 
and  also  for  the  payment  of  tax  on  the  spirits  before  their 
removal  from  such  storage  and  within  eight  years  from  the 
date  of  original  entry  in  the  distillery  warehouse. 

From  No.  359 — Distillers'  Annual  Warehousing. — For  the 
convenience  of  distillers,  so  that  they  will  not  have  to  file 
Monthly  Warehousing  Bonds  (Form  No.  80),  they  can  file 
Bond  Form  No.  359,  which  guarantees  that  they  will  pay  the 
tax  on  spirits  deposited  in  their  warehouses  during  the  time 
for  which  the  bond  is  given.  The  penalty  of  these  bonds  is 
fixed  by  the  Internal  Revenue  Department  on  the  estimated 
quantity  of  spirits  to  be  deposited  during  the  year,  and  at 
the  rate  of  $1.10  per  gallon. 

The  spirits  distilled  each  month  are  charged  to  the  Annual 
Warehousing  Bond  (Form  No.  359),  and,  if  the  number  of 
gallons  distilled  during  the  year  and  remaining  in  the  ware- 
house multiplied  by  $1.10  exceeds  the  penalty  of  the  annual 
bond,  the  distiller  is  required  to  file  an  additional  warehous- 
ing bond  or  a  Monthly  Warehousing  Bond  (Form  No.  80)  for 
such  excessive  spirits. 

Form  No.  387 — Filled  Cheese  Manufacturer. — Every  manu- 
facturer of  filled  cheese  is  required  to  file  a  bond  in  penal 
sum  of  not  less  than  $5,000  with  the  Collector  of  the  district 
in  which  his  factory  is  located,  guaranteeing  the  compliance 
with  the  laws  and  regulations  of  the  Internal  Revenue  De- 
partment. The  same  is  filed  before  the  manufacturer  com- 
mences business.  It  expires  on  the  last  day  of  June  and 
must  be  renewed  annually. 

Form  No.  432 — Bond  for  Withdrawal  of  Alcohol  Free  of 
Taw  for  Scientific  Purposes. — Under  the  U.  S.  laws  alcohol, 
when  used  strictly  for  scientific  purposes  by  scientific  or 
educational  institutions,  can  be  withdrawn  from  the  ware- 

131 


FIDELITY   INSURANCE   AND   CORPORATE   SURETYSHIP. 

houses  free  of  tax.  When  such  is  done  Bond  No.  432  is  given. 
This  guarantees  that  the  alcohol  will  only  be  used  in  the 
manner  allowed.  The  obligation  in  such  cases  must  be  given 
in  a  penal  sum  at  least  double  the  tax  on  the  alcohol  to 
be  so  withdrawn,  and  can  in  no  case  be  less  than  $200. 

Form  No.  506 — Manufacturer  of  Adulterated  Butter. — Each 
manufacturer  of  adulterated  butter  is  required  to  give  bond 
at  the  time  he  begins  operations.  The  same  is  continuous 
in  form,  and  the  penalty  is  fixed  by  the  collector  of  the  dis- 
trict in  which  the  factory  is  located,  being  in  no  case  less 
than  $500.  Compliance  with  the  requirements  of  the  depart- 
ment in  question  is  guaranteed  by  this  instrument. 

Form  No.  508 — Bond  for  the  Manufacture  of  Renovated 
Butter. — This  bond  is  similar  in  form  to  No.  506  except  that 
it  applies  specifically  to  the  manufacture  of  renovated  butter. 

Denatured  Alcohol. — A  number  of  bonds  are  required  to  be 
given  under  recent  Acts  of  Congress  concerning  denatured 
alcohol,  central  denaturing  bonded  warehouses,  and  industrial 
distilleries.  For  full  information  on  these  topics  refer  to 
Regulations  No.  30  Revised  U.  S.  Internal  Revenue  Depart- 
ment. 

2 — CUSTOM  BONDS. 

The  principal  bonds  of  this  class  are: 

Form  No.  456 — Manufacturer's  Bond — Transfer. — It  fre- 
quently happens  that  manufacturers,  who  have  dutiable  goods 
in  one  custom  warehouse,  desire  to  transport  the  goods  into 
another  bonded  manufacturing  warehouse.  In  such  cases 
they  are  required  to  give  this  form  of  bond.  It  is  given  in 
double  the  value  of  the  merchandise  to  be  transported. 

Form  No.  462 — Manufacturer's  Bond. — This  is  a  bond  con- 
ditioned that  materials  transferred  into  a  bonded  manufac- 
turer's warehouse  shall  be  used  in  manufactures  on  the 
premises,  and  that  articles  made  therefrom  shall  be  exported 
from  the  United  States.  The  principal  must  comply  with  all 
the  requirements  of  the  Customs  laws  and  the  Treasury  regu- 

132 


FIDELITY  INSURANCE   AND   CORPORATE   SURETYSHIP. 

lations  in  respect  to  the  custody,  use  and  accounting  for  the 
materials  or  the  manufactured  product. 

Form  No.  467 — Direct  Export  Bond — (Bonded  Manufac- 
turer's Warehouse). — Under  the  Tariff  Act  no  manufactured 
goods  can  be  entered  for  consumption,  unless  a  bond  be  given 
in  double  the  amount  of  the  duty.  This  instrument  guar- 
antees that  the  goods  will  be  landed  in  a  foreign  port,  and 
certificate  produced  to  that  effect. 

If  the  value  of  the  goods  to  be  exported  is  less  than  $100, 
the  production  of  the  bill  of  lading  showing  shipment  is 
sufficient. 

Form  No.  469 — Bond  for  the  Transportation  and  Export  of 
Manufactured  Tobacco. — This  bond  is  given  for  double  the 
amount  of  the  tax  and  duty  on  the  tobacco,  the  guarantee 
being  the  same  as  in  Bond  No.  467. 

Form  No.  472 — Bond  in  Case  of  Vessel  Proceeding  with 
Cargo  Destined  for  a  Foreign  Port. — This  bond  is  required 
of  a  vessel  proceeding  with  cargo  destined  for  a  foreign  port 
and  guarantees  that  the  cargo  will  be  landed  at  destination, 
and  a  certificate  produced  to  that  effect.  It  is,  therefore, 
somewhat  similar  to  Bond  No.  467. 

Form  No.  474 — Bond  of  Master  for  Due  Entry  of  Residue 
of  Cargo  in  Other  Districts. — This  is  a  bond  which  guarantees 
that,  on  landing  the  residue  of  a  cargo,  a  certificate  will  be 
produced  and  delivered  to  the  Collector  of  Customs  at  the 
first  point  of  landing. 

Form  No.  503 — Bond  of  Indemnity  upon  Obtaining  Permit 
to  Land  Goods  at  Night. — This  bond  is  known  by  Custom 
House  officials  as  a  "  Night  Bond,'  and  guarantees  that  duty 
will  be  paid  on  any  goods  landed  at  night  even  though  such 
goods  should  become  lost. 

It  is  given  in  order  to  enable  vessels  to  unload  after  sun- 
down, and  is,  therefore,  of  frequent  occurrence.  The  bond 
runs  to  the  Collector. 

Form  No.  582 — Bond  When  Triplicate  Invoice  is  Wanting. 
— The  regulations  of  the  Government  require  that  any  goods 

133 


FIDELITY  INSUBANCE   AND   CORPORATE   SURETYSHIP. 

exported  from  foreign  ports  (imported)  should  all  have  at- 
tached to  the  bill  a  certificate  from  the  American  Consul  at 
such  port.  This  certificate  is  known  as  a  Triplicate  Invoice 
or  Verified  Invoice.  The  bond  guarantees  that  such  certificate 
will  be  produced  within  a  required  period,  and  is  given  when 
the  certificate  is  not  properly  attached  upon  the  delivery  of 
the  goods  by  the  Custom  House  officials. 

Form  No.  583 — Bond  to  Produce  Verified  Invoice. — This 
obligation  is  conditioned  for  its  production,  within  six  months 
from  date,  of  a  duly  authenticated  invoice  of  the  goods,  and 
guarantees  that  the  obligor  will  pay  the  Collector  the  amount 
of  duty  due,  as  per  such  invoice,  over  and  above  the  duties 
estimated  on  appraisement. 

Form  No.  589 — Bond  of  Importer,  Consignee  or  Agent,  to 
Produce  Declaration  of  Owner  to  Invoice  and  Entry. — It  fre- 
quently happens  that  instead  of  a  certificate  of  the  American 
Consul,  as  is  the  case  in  Bond  No.  582,  a  certificate  showing 
the  declaration  of  the  owner  as  to  the  invoice  and  entry  must 
be  produced.  When  such  is  the  case,  the  Bond  No.  589  is 
used. 

Form  No.  590 — Bond  of  Importer  on  Delivery  to  Him  of 
Packages  not  Designated  for  Examination. — It  often  happens 
that  an  importer  desires  to  take  goods  from  the  Custom 
House  before  the  appraiser  has  made  his  report.  In  such 
cases  the  Government  allows  the  goods  to  be  removed,  pro- 
vided a  bond  is  given  for  double  their  value,  and  guaranteeing 
that  the  importer  will  return  the  goods  if  called  for  by  the 
Government  within  ten  days.  (Bond  591-e  is  a  similar  bond.) 

Form  No.  591 — Bond  for  Six  Months  for  Delivery  of  Un- 
examined  Packages. — This  bond  is  the  same  as  No.  590,  except 
that  the  time  for  returning  the  goods  to  the  Government  is 
six  months.  (This  bond  is  similar  to  591-f.) 

Form  No.  591-e — Bond  for  Delivery  of  Unexamined  Pack- 
ages.— This  bond  is  conditioned  for  return  within  ten  days 
of  packages  deliver  to  an  importer.  If  this  is  not  done  the 

134 


FIDELITY  INSURANCE  AND   CORPORATE   SURETYSHIP. 

obligor  must  pay  the  full  invoice  value  and  duty  on  packages 
not  returned.  (This  bond  is  very  similar  to  Form  No.  590.) 

Form  No.  591-f — Bond  for  Delivery  of  Unexamined  Pack- 
ages.— The  conditions  under  this  bond  are  similar  to  those 
under  Bond  Form  591-c,  except  that  it  covers  all  such  trans- 
actions for  a  period  of  six  months.  (This  bond  is  very  similar 
to  No.  591.) 

Form  No.  596 — Bond  to  Produce  Certificate  of  Exportation 
of  American  Products. — It  frequently  happens  that  American 
goods  which  have  been  exported  are  returned  to  this  country 
without  a  certificate  showing  that  they  are  exported  goods. 
When  such  is  the  case,  and  it  is  desired  to  remove  the  goods 
from  the  Custom  House,  a  bond  is  required  in  double  the 
amount  of  the  duty  on  the  goods,  if  such  goods  are  dutiable. 
This  guarantees  that  a  certificate  of  export,  showing  that  the 
goods  were  actually  American  products,  will  be  given  to  the 
Custom  House  officials. 

Form  No.  605 — Bond  for  Exportation  of  Adulterated  Drugs. 
— It  is  against  the  laws  of  the  United  States  to  manufacture 
within  certain  limits  adulterated  drugs,  and  when  such  goods 
are  manufactured  to  be  exported,  a  bond  under  the  above 
form  is  required  with  the  condition  that  the  adulterated  drugs 
will  be  landed  outside  of  the  United  States. 

Form  No.  682 — Bond  of  Claimant  of  Seized  Goods  for  Costs 
of  Court. — Where  goods  are  seized  by  the  Custom  Officials 
the  claimant  may  intervene  in  the  forfeiture  proceedings  upon 
furnishing  a  bond  for  $250  to  cover  costs,  and  conditioned 
that  obligor  shall  pay  to  the  United  States  all  costs  and 
expenses  of  condemnation  proceedings. 

Form  No.  704 — Warehousing  Bond. — When  it  is  desirous 
of  leaving  goods  in  the  Custom  House,  the  Government  re- 
quires a  bond  in  double  the  amount  of  the  duty  on  such  goods. 
The  bond  guarantees  to  make  good  the  difference  between  the 
amount  for  which  the  goods  are  sold  and  the  amount  of  the 
duty. 

135 


FIDELITY  INSURANCE   AND   CORPORATE   SURETYSHIP. 

Form  No.  725 — Bond  on  Withdrawal  of  Salt  for  Curing 
Fish. — When  it  is  desirous  of  using  imported  salt  for  the 
curing  of  fish,  the  Government  will  allow  such  salt  to  be 
withdrawn  free  of  duty,  provided  a  bond  is  filed  guaranteeing 
that  the  salt  so  withdrawn  will  be  used  for  this  purpose. 

Form  No.  739 — Transportation  Bond. — When  a  merchant 
desires  to  transfer  merchandise  from  a  custom  warehouse 
in  one  district  to  a  custom  warehouse  in  another  district, 
he  is  obliged  to  give  a  bond  guaranteeing  the  goods  during 
transit  and  that  the  goods  will  be  rewarehoused  in  the  other 
district. 

Form  No.  747— Bond  for  Re-delivery  of  Articles  Imported 
Under  Sections  2505,  2511,  2512  and  3021. — There  are  some 
classes  of  merchandise  and  articles,  which  can  be  imported 
into  this  country  and  shown  or  used  without  duty,  provided 
a  bond  is  'given  guaranteeing  that  the  goods  will  be  exported 
within  six  months  from  the  date  of  their  importation. 

Form  No.  747% — Bond  for  Exhibition  of  Works  of  Art 
(Under  Paragraph  702,  Act  of  July  24,  1897.) — The  guarantee 
in  this  bond  is  the  same  as  in  No.  747,  except  that  it  can 
be  extended  six  months  upon  application  to  the  Secretary  of 
the  Treasury. 

Form  No.  747% — Bond  for  Importation  of  Animals  for  Ex- 
hibition.— Same  as  No.  747  y2. 

Form  No.  764 — Export  Bond. — This  bond  is  given  in  double 
the  amount  of  the  duty,  and  guarantees  that  the  goods  cov- 
ered by  the  bond  will  be  landed  in  a  foreign  port  and  a  cer- 
tificate produced  to  that  effect. 

Form  No.  772 — Bond  for  Exportation  of  Repaired  or  Re- 
manufactured  Railroad  Iron. — This  bond  guarantees  that  the 
material  bonded  will  be  re-exported  within  six  months  from 
the  date  of  entry  at  the  port  of  importation,  or  duties  paid. 

Form  No.  781 — Bond  for  Exportation  of  Domestic  Spirits. — 
This  bond  is  double  the  amount  of  the  tax  on  spirits,  and 
guarantees  that"  a  certificate  of  the  goods  having  been  landed 
in  a  foreign  port  will  be  produced. 

136 


FIDELITY  INSURANCE  AND   COEPOEATE  SURETYSHIP. 

Form  No.  788 — Bond  on  Export  of  Imported  Merchandise 
with  Benefit  of  Drawback. — Upon  the  exportation  of  imported 
merchandise  shipped  with  benefit  of  a  drawback,  a  bond  is 
given  to  produce  the  landing  certificate  showing  the  delivery 
of  the  merchandise  outside  the  limits  of  the  United  States. 

Form  No.  790 — Bond  for  Export  of  Manufactured  Articles 
with  Benefit  of  Drawback. — This  bond  is  the  same  as  No. 
788,  except  that  it  is  drawn  to  cover  imported  materials 
which  are  to  be  manufactured  and  then  exported. 

Form  No.  803 — Bond  for  Exportation  of  Distilled  8pirits — 
Form  VIII  Internal  Revenue. — This  bond  is  given  in  double 
the  amount  of  the  tax  on  the  spirits  and  guarantees  that  a 
certificate  will  be  produced  showing  that  the  goods  have  been 
landed  in  a  foreign  country. 

Form  No.  809 — Bond  for  Custom  House  Draymen  and 
Lightermen. — Whenever  it  is  necessary  to  move  goods  from  a 
vessel  to  the  Custom  Warehouse,  the  Government  requires  a 
bond  guaranteeing  that  the  transfer  of  the  goods  will  be 
safely  accomplished. 

Form  No.  811 — Bond  on  Withdrawal  of  Supplies  for  a  Ves- 
sel Clearing  Coastwise. — When  it  is  necessary  for  vessels  trad- 
ing coastwise  to  withdraw  supplies,  and  production  of  proof 
is  required  by  Custom  House  regulations  that  such  with- 
drawal is  necessary,  the  above  bond  is  given. 

Form  No.  820 — Bond  for  Storage  of  Imported  Teas. — As 
the  Government  has  no  regular  warehouses  for  the  storing 
of  teas,  and  it  frequently  is  desirable  to  keep  them  in  pri- 
vate warehouses,  this  bond  is  given.  It  guarantees  the  safe- 
holding  of  such  teas  in  the  warehouse  until  released. 

Form  No.  821 — Bond  for  Examination  of  Imported  Teas. — 
This  bond  is  for  one-fourth  of  the  value  of  the  tea,  and  guar- 
antees that  the  tea,  when  placed  in  private  warehouses,  will 
be  examined.  Tea  is  free  of  duty. 

Form  No.  823 — Bond  for  the  Exportation  of  Impure  and 
Unwholesome  Tea. — This  bond  is  conditioned  for  exportation 
of  impure  and  unwholesome  tea  within  sigc  months  from  date 

137 


FIDELITY  INSURANCE   AND   CORPORATE   SURETYSHIP. 

of  final  examination  or  re-examination  of  the  same  and  the 
production  of  evidence  showing  the  landing  abroad  of  the 
merchandise. 

Form  No.  787 — Bond  of  Common  Carrier  for  Immediate 
Transportation  of  Dutiable  Merchandise. — In  order  to  facili- 
tate the  moving  of  imported  merchandise,  it  is  the  custom 
of  common  carriers  to  make  a  contract  with  the  Government 
that  they  will,  during  transit,  treat  the  goods  in  such  a 
manner  as  to  keep  them  practically  warehoused  during  trans- 
portation. They  are  required,  therefore,  to  give  bond  of 
$100,000  guaranteeing  that  they  will  safely  and  properly  hold 
the  goods  so  delivered  to  them  during  transit. 

BOND  FORMS. 

1 — INTERNAL  REVENUE  BONDS. 

Internal  Revenue  Bonds  must  always  be  issued  on  forms 
provided  by  the  Government.  These  can  be  secured  from  any 
local  Internal  Revenue  Office.  As  each  form  is  numbered,  the 
numbers  should  be  noted  carefully  and  mentioned  whenever 
any  reference  is  made  to  bonds  of  this  kind. 

As  individuals,  firms  and  corporations,  who  find  it  neces- 
sary to  give  bonds  to  the  Government  in  Internal  Revenue 
matters,  usually  require  a  number  of  bonds  during  the  year, 
it  is  customary  for  surety  companies  to  make  annual  con- 
tracts to  write  all  of  the  bonds  of  this  nature  which  the 
same  principal  may  require. 

2 — CUSTOMS  BONDS. 

The  manner  of  filing  bonds  in  the  Custom  House  differs 
from  that  pursued  in  connection  with  Internal  Revenue  Bonds, 
in  that  they  must  be  executed  by  the  agent  in  what  is  known 
as  the  "  Bond  Book."  The  agents  of  surety  companies,  there- 
fore, are  required  to  visit  the  Custom  House  in  order  to 
execute  the  bonds.  As  a  copy  will  not  be  furnished,  care 
should  be  taken  to  note  the  Government  Form  number,  in 
order  to  designate  the  exact  bond  signed. 

138 


FIDELITY   INSURANCE   AND   CORPORATE   SURETYSHIP. 

Desirability  of  Custom  House  Broker. — As  a  certain  amount 
of  technical  knowledge  is  necessary  in  order  to  properly 
conduct  business  with  the  Custom  House,  it  is  convenient 
quite  frequently  to  deal  through  Custom  House  brokers,  who 
often  represent  the  principal  in  furnishing  bonds.  There- 
fore, agents  and  solicitors  should  get  in  touch  with  the 
various  Custom  House  brokers  and  endeavor  to  make  an 
arrangement  for  furnishing  the  bonds  needed  by  their  clients. 

SUGGESTIONS  IN  REGARD  TO  THIS  BUSINESS. 
Statistics  show  that  a  great  many  Custom  and  Internal 
Revenue  Bonds  are  still  filed  with  personal  sureties,  for  the 
reason,  principally,  that  the  agents  of  surety  companies  have 
not,  generally  speaking,  familiarized  themselves  with  these 
bonds  so  as  to  be  able  to  solicit  them  properly.  By  noting, 
however,  the  character  of  forms  which  are  apt  to  be  called 
into  use  for  bonds  coming  under  these  two  classes,  and  by 
making  the  acquaintance  of  the  Customs  and  Internal  Revenue 
officials  in  his  territory,  in  addition  to  securing  information 
as  to  how  to  get  in  touch  with  the  people  who  file  bonds 
in  these  departments,  the  agent  can  secure  considerable  busi- 
ness in  the  lines  treated  in  this  chapter. 


139 


CHAPTER  XII. 

BONDS  GIVEN  FOR  MUNICIPAL  OR  EXCISE 
LICENSES  IN  COMPLIANCE  WITH  LOCAL 
LAWS. 

Bonds  covering  the  above  contingencies  differ  from  the  usual 
fidelity  and  contract  obligations.  In  the  latter  risks  there 
are  certain  duties,  either  expressed  or  implied,  put  upon  the 
employer  or  obligee,  which  must  be  performed  by  him,  in 
order  that  the  surety  may  be  held  responsible;  while  in  the 
bonds  referred  to  in  this,  as  well  as  in  several  other  chap- 
ters, no  such  duty  is  imposed.  For  this  reason  these  instru- 
ments more  properly  partake  of  the  nature  of  indemnity 
obligations  rather  than  surety  bonds. 

For  example,  in  fidelity  and  contract  propositions,  the  lia- 
bility of  the  surety  is  predicated  upon  the  contract.  Thus,  in 
a  Fidelity  Bond  the  employer  agrees,  among  other  things,  to 
make  an  examination  of  the  employee's  accounts  at  stated 
intervals,  to  give  immediate  notice  of  any  default  to  the 
surety,  to  swear  out  a  warrant  for  the  arrest  of  the  employee, 
if  required,  etc.  Furthermore,  in  contract  obligations  we 
have  seen  that  the  contract  and  specifications  are  made  a 
part  of  the  bond,  and  that  whatever  duties  are  imposed 
upon  the  owner  in  favor  of  the  contractor,  likewise  inure 
to  the  benefit  of  the  surety,  while  a  violation  of  them 
vitiates  the  bond.  Therefore,  when  a  contractor  has  severed 
his  obligation  by  completing  a  contract  according  to  his  plans 
and  specifications,  the  surety's  liability  is  at  an  end.  Like- 
wise in  the  fidelity  class,  when  the  surety  is  satisfied  as  to 
its  indebtedness  to  the  assured  by  reason  of  any  default  or 
miscarriage  on  the  part  of  the  principal,  and  pays  the  same, 
the  liability  terminates.  In  a  Miscellaenous  or  Indemnity 

140 


FIDELITY   INSURANCE   AND   CORPORATE   SURETYSHIP. 

Bond,  however,  the  surety  guarantees  not  only  the  affirma- 
tive and  negative  features  of  a  written  or  implied  contract, 
but  also  immunity  to  the  obligee  from  any  loss,  cost  or 
expense  of  any  nature,  which  might  be  sustained  by  reason 
of  the  principal's  doing  or  failing  to  do  some  particularly 
specified  thing.  The  bonds  here  treated  are  given  to  protect 
states  and  cities  against  loss  occasioned  by  a  non-compliance 
with  the  provisions  of  various  statutes  by  persons  trans- 
acting certain  classes  of  business. 

While  the  bonds  treated  under  this  heading  are  broad  in 
their  scope,  they  are  not  for  that  reason  additionally  haz- 
ardous. On  the  contrary,  with  comparatively  few  exceptions, 
they  are  considered  desirable  business. 

In  view  of  the  fact  that  the  risk  under  these  bonds  depends 
upon  the  local  laws  under  which  they  are  required,  such  legal 
regulations  should  be  looked  into  carefully  in  order  to  deter- 
mine the  risk  assumed  in  each  particular  community.  The 
regulations  governing  a  certain  class  of  business  might  be 
materially  different  in  one  locality  from  another.  This  applies 
particularly  to  obligations  for  municipal  franchises  and 
licenses,  and  also  for  excise  licenses.  The  latter  class  is,  as 
a  general  rule,  very  hazardous. 

These  obligations  are  furnished  in  compliance  with  the  local 
laws,  and  are  either  statutory  in  form,  or  are  drawn  subject 
to  the  approval  of  a  City  Solicitor,  Attorney-General,  or  some 
other  duly  appointed  legal  adviser. 

CLASSIFICATION  OF  BONDS. 

1 — PAWN   BROKERS. 

Bonds  are  required  to  be  given  in  many  states  by 
pawn  brokers.  They  are  to  guarantee  the  faithful  com- 
pliance with  the  laws  regulating  this  class  of  business. 
In  some  states  the  statute  goes  so  far  as  to  specify  a  form 
in  which  the  applicant  is  required  to  keep  his  books.  In 
many  others  the  laws  relating  to  this  business  are  more  or 

141 


FIDELITY   INSURANCE   AND    CORPORATE    SURETYSHIP. 

less  interwoven  with  the  police  regulations.     These  should  be 
investigated  when  considering  risks  of  this  nature. 

2 — EMPLOYMENT    AGENTS. 

When  it  became  the  practice  of  most  employment  agents 
to  exact  a  fee  from  persons  desiring  employment,  it  was 
deemed  advisable  in  various  states  and  cities  to  pass  laws 
requiring  them  to  take  out  licenses  and  give  bond  guarantee- 
ing that  their  agencies  would  be  conducted  according  to  law. 
This  was  a  result  of  the  desire  to  protect  ignorant  or  illiterate 
applicants,  seeking  employment,  from  imposition  in  any  way. 
These  bonds,  as  a  rule,  are  undesirable. 

3 AUCTIONEERS. 

Auctioneers  in  many  states  are  required  to  secure  licenses 
and  furnish  a  bond  guaranteeing  that  their  business  will  be 
transacted  according  to  law. 

4 — NURSERYMEN. 

Nurserymen  are  frequently  required  to  give  a  bond  that 
guarantees  a  compliance  with  the  laws  and  regulations  refer- 
ring to  the  selling  of  trees.  Under  these  laws  they  are  sub- 
ject to  the  supervision  of  the  State  Entomologist,  among 
whose  duties  it  is  to  see  that  no  diseased  trees  are  bought 
and  sold. 

5 — PLUMBERS. 

In  many  cities  plumbers  must  furnish  bond  guaranteeing 
that  they  will  comply  with  the  law  requiring  their  work  to 
be  done  according  to  proper  sanitary  rules  and  regulations, 
in  order  to  protect  the  city  from  loss  by  reason  of  damage 
suits  arising  from  accidents,  or  from  damage  caused  to 
property  by  deficient  workmanship. 

6 — DRAIN    LAYERS. 

Owing  to  the  fact  that  drain  layers  in  many  cases  have 
to  remove  and  tear  up  pavements  and  streets  (which  they 

142 


FIDELITY   INSURANCE   AND    CORPORATE    SURETYSHIP. 

are  required  to  replace)  and  frequently  to  tap  public  sewers, 
they  are  often  required  to  furnish  a  bond  to  the  city,  which 
guarantees  that  they  will  properly  comply  with  the  law  appli- 
cable to  their  business. 

7 — MOVING    BUILDINGS. 

In  many  municipalities,  it  is  necessary  for  a  mover  of 
houses  to  furnish  bond  to  protect  the  city  against  any  dam- 
age of  any  character  occasioned  by  the  moving  of  a  building. 
These  bonds  should  only  be  written  for  applicants  of  experi- 
ence and  financial  responsibility. 

8 — WAREHOUSE    BONDS. 

These  obligations  must  not  be  confused  with  the  .warehouse 
bonds  given  to  comply  with  the  laws  of  the  Internal  Revenue 
Department,  as  we  have  seen  that  bonds  of  that  class  are 
furnished  by  distillers  or  warehousemen  handling  liquors.  It 
frequently  occurs,  however,  that  owing  to  certain  state  laws, 
rules  and  regulations  of  boards  of  trade,  etc.,  a  public  ware- 
houseman, storing  commidities  other  than  liquor,  is  asked  to 
give  bond.  These  bonds  in  some  states  are  considered  good 
risks,  but  in  others  they  are  extremely  hazardous.  There- 
fore, care  should  be  taken  to  see  that  the  laws  for  the  com- 
pliance with  which  the  bond  is  given  are  not  such  as  to  guar- 
antee warehouse  receipts.  The  applicant's  financial  stand- 
ing and  general  business  reputation  should  be  seriously  con- 
sidered in  determining  as  to  the  advisability  of  these  risks. 

9 — USING    EXPLOSIVES. 

In  many  states  the  user  of  explosives  is  required  to  secure 
a  license  and  to  give  a  bond  guaranteeing  protection  to  the 
city  against  any  loss  or  damage  that  may  arise  from  their 
use.  As  can  be  seen,  this  business  is  in  most  cases  extremely 
hazardous,  and  should  be  written  only  for  an  applicant  of 
great  experience  and  unquestioned  financial  responsibility. 

143 


FIDELITY  INSURANCE  AND   CORPORATE   SURETYSHIP. 
1 0 — ELECTRICIANS . 

It  is  the  practice  in  most  cities  to  require  electricians  to 
secure  a  license,  and  give  a  bond  guaranteeing  that  their 
work  will  be  done  according  to  the  laws  applicable  to  this 
particular  kind  of  business.  This  has  become  necessary  owing 
to  the  frequent  fires  caused  by  incompetent,  inefficient  or 
inexperienced  workmen. 

11 — STREET  OBSTRUCTIONS. 

It  is  the  practice  in  many  municipalities  to  require  a  build- 
ing contractor,  or  others  desiring  to  obstruct  a  street,  to 
secure  a  permit  or  license,  and  give  bond  guaranteeing  that 
such  street  will  be  repaired  if  damaged  by  the  contemplated 
work.  This  bond  sometimes  operates  to  protect  the  city  by 
reason  of  damage  to  persons  or  property. 

12 — DRAYMEN. 

In  most  cities  it  is  customary  to  license  all  teams  and 
drays,  and  in  many  places  bond  must  be  given  guaranteeing 
that  the  law  in  reference  to  this  particular  business  will  be 
observed,  and  indemnifying  the  city  from  loss  in  case  of  suit 
under  certain  contingencies. 

13 — SIGN   LICENSE. 

In  many  municipalities  there  are  certain  laws  and  regu- 
lations pertaining  to  signs,  and  in  some  instances  a  license 
is  required  before  a  sign  can  be  displayed  or  hung,  together 
with  a  bond  holding  the  city  harmless  from  any  injury  that 
may  arise  out  of  the  improper  placing  of  the  same. 

14 — HOISTING. 

It  is  necessary  in  some  places  to  secure  a  license  for  hoist- 
ing, and  bond  is  required  holding  the  city  harmless  for  any 
damage  that  may  come  from  the  granting  of  a  license. 

144 


FIDELITY  INSURANCE   AND   CORPORATE   SURETYSHIP. 
15 — TICKET  BROKER. 

In  order  to  prevent  the  selling  of  bogus  tickets,  it  is  the 
practice  in  many  cities  to  require  all  ticket  brokers  to  fur- 
nish bond  protecting  the  public  against  loss.  These  bonds 
are  undesirable,  except  for  well  established  and  financially 
strong  brokers. 

16 — OPENING    STREETS. 

In  accordance  with  the  laws  in  many  municipalities,  any 
individual  or  corporation  making  sewer  connections,  and  de- 
siring to  open  or  tear  up  a  street,  is  required  to  give  a  bond 
guaranteeing  the  relaying  of  the  street  in  a  proper  manner, 
and  also  holding  the  city  harmless  against  any  loss  in  con- 
sequence of  such  permission  having  been  granted.  In  con- 
sidering these  propositions,  the  financial  responsibility  and 
general  reputation  of  the  contractor  should  be  given  careful 
consideration. 

17 — STATIONARY    ENGINEERS. 

It  is  the  practice  in  many  cities  and  states  to  require  all 
engineers  of  stationary  engines  to  secure  a  license.  Usually 
they  are  required  to  pass  an  examination  as  to  their  efficiency, 
and  must  in  addition  give  bond  guaranteeing  the  faithful 
performance  of  their  duties  as  far  as  the  interests  of  the  city 
are  concerned.  These  bonds  are  considered  desirable  in  those 
places  where  the  law  is  not  too  rigid.  A  list  of  the  persons 
requiring  bonds  under  this  class  can  usually  be  obtained  from 
the  examining  boards,  who  will  readily  furnish  copies  of  the 
local  ordinances,  state  laws,  etc.,  covering  this  position. 

18 — BOILER. 

Same  as  "  Stationary  Engineers." 

19 — THEATRE. 

In  many  cities  the  theatres  or  places  of  amusement  are 
required  to  secure  a  license  either  from  the  Police  Board,  or 
some  similar  body.  They  must  in  addition  furnish  a  bond 

145 


FIDELITY   INSURANCE   AND    CORPORATE    SURETYSHIP. 

guaranteeing  compliance  with  the  local  laws  and  ordinances 
referring  to  this  particular  line  of  business. 

20 — SCALE. 

In  many  cities  any  one  who  desires  to  operate  a  public 
scale  is  required  to  secure  a  permit  or  license,  and  before 
such  license  is  granted,  a  bond  must  be  filed  guaranteeing 
the  correctness  and  honesty  of  the  weights  specified  in  the 
certificates  issued  by  the  operator. 

21 BASEMENT    STAIRWAY. 

Under  this  heading  are  included  those  licenses  granted  by 
various  municipalities  giving  permission  to  property  owners 
to  erect  a  basement  stairway  or  a  cellar  under  the  sidewalk. 
A  bond  is  frequently  required  guaranteeing  that  the  owner 
will  hold  the  city  harmless  from  any  suit  for  personal  injury 
or  property  damaged. 

22 GUARANTEEING    FRANCHISES    TO    PUBLIC    BODIES. 

(See  Miscellaneous  Contract  Bonds,  chap.  V.) 

23 — BILL    BOARD. 

It  is  customary  in  many  municipalities  to  exact  of  any 
one  erecting  a  bill  board  a  bond  to  hold  the  city  harmless 
in  case  of  any  loss  or  damage  arising  from  the  construction  of 
the  same.  The  liability  under  this  particular  risk  is  prac- 
tically the  same  as  under  a  Sign  License  Bond. 

24 — EXCISE. 

These  bonds  are  on  the  prohibited  list  of  most  surety 
companies.  The  danger  lies  in  the  fact  that  they  are 
given  to  guarantee  the  faithful  compliance  with  liquor  laws, 
which  in  most  states  are  extremely  rigid.  Furthermore,  the 
bond  forms  and  practices  in  some  states  are  such  as  to  make 
these  obligations  practically  a  forfeiture  bond.  In  some 

146 


FIDELITY  INSURANCE  AND   CORPORATE   SURETYSHIP. 

states,  the  bond  is  liable  not  only  for  the  fines  levied  for  the 
breaking  of  the  law,  but  also  for  any  personal  injury  that 
may  be  done  to  any  one,  where  such  injury  is  traceable  to 
excessive  drinking. 

As  a  rule,  the  laws  governing  the  traffic  of  liquor  are  very 
strict,  and  the  question  of  the  enforcement  of  them,  owing 
to  local  agitation  or  any  other  similar  reason,  makes  this 
class  of  business  extremely  undesirable.  Furthermore,  the 
people  who  will  want  a  bond  of  this  nature  are  generally 
of  a  class  having  very  little  financial  worth,  and  this  of  itself 
makes  surety  companies  very  loath  to  assume  these  obligations. 


147 


CHAPTER  XIII. 

BONDS  GUARANTEEING  THE  SOLVENCY  OF 
DEPOSITORIES. 

There  is  no  class  of  bonds  issued  by  surety  companies  as 
much  discussed  as  those  guaranteeing  the  solvency  of  banks 
(national  and  state  institutions),  and  trust  companies.  The 
feasibility  of  this  practice  was  a  plank  in  one  of  the  political 
platforms  during  the  Presidential  campaign  of  1908,  and  the 
general  scheme  was  then  discussed  thoroughly  in  many  states, 
and  adopted,  in  some  few  instances.  During  this  period  a 
careful  computation  was  made  of  the  losses  sustained  by 
surety  companies  on  depository  bonds  as  compared  with 
premiums  received,  and  as  a  result  it  was  proved  that,  though 
there  are  periods  in  which  surety  companies  are  remarkably 
free  from  danger,  in  times  of  great  financial  depression  they 
are  subject  to  severe  loss.  (This  fact  has  made  it  necessary 
to  rearrange  the  rates  formerly  charged.) 

This  business  when  properly  underwritten  is  acceptable  to 
most  companies.  It  may  be  stated,  however,  that  the  amount 
of  liability  assumed  at  the  present  time  under  a  depository 
bond  for  any  banking  institution,  however  strong,  is  very 
much  smaller  than  in  previous  years.  When,  therefore,  it 
becomes  necessary  for  any  one  surety  company  to  accept  a 
large  obligation  (which  happens  when  the  law  requires  a 
single  surety  to  assume  the  entire  risk),  it  is  the  general 
practice  to  reinsure  a  portion  of  such  risk,  as  one  of  the 
greatest  dangers  in  writing  this  particular  class  of  business 
arises  from  having  an  "  over-loaded  line." 

148 


FIDELITY  INSURANCE  AND   CORPORATE   SURETYSHIP. 

CLASSIFICATION  OF  THESE  BONDS. 

1 — PROMPT    PAYMENT    CLASS. 

These  bonds  guarantee  that  the  surety  will  promptly  pay 
to  the  assured  the  amount  of  money  due  upon  the  failure 
of  the  banking  institution.  They  include  bonds  running  to 
the  U.  S.  Government,  states,  counties  and  municipalities. 

2 DEFERRED   PAYMENT    CLASS. 

These  bonds  guarantee  to  pay  to  the  assured  the  eventual 
loss,  which  is  deferred  until  the  final  liquidation  of  the  de- 
funct institution.  They  are  usually  issued  to  individuals, 
corporations  and  associations. 

The  policy  of  accepting  these  two  classes,  viewed  from  an 
underwriting  standpoint,  is  vastly  different,  even  though  the 
eventful  net  loss  to  the  surety  under  each  is  the  same.  With- 
out taking  into  consideration  any  other  phase  of  the  question, 
two  things  must  be  considered  in  the  execution  of  depository 
bonds. 

First,  whether  the  total  premiums  obtained  will  be  enough 
to  pay  the  eventual  losses. 

Second,  the  expediency,  from  a  company's  financial  view- 
point, of  assuming  risks  involving  the  prompt  payment  of 

rge  sums  of  money. 

The  former  point  will  be  fully  determined  by  statistics, 
while  the  latter  will  depend  upon  the  company's  available 
surplus,  the  character  and  condition  of  its  investments,  and 
upon  the  other  obligations  which  it  has  assumed  under  other 
classes  of  bonds. 

1 — THE    PROMPT    PAYMENT   BOND.* 

The  Prompt  Payment  Bond,  in  which  the  surety  agrees 
to  pay  the  loss  immediately,  is  the  form  required  by 
the  Federal  Government,  states,  counties  and  municipali- 
ties. These  are  usually  in  large  amounts,  and  when 


See  Appendix,  page  228. 

149 


FIDELITY  INSURANCE   AND   CORPORATE   SURETYSHIP. 

a  loss  occurs  under  them,  the  surety  having  a  large 
percentage  of  its  assets  in  securities  may  find  that  it  is 
obliged  to  sell  same  at  a  very  low  price,  for  the  reason  that 
a  loss  seldom  occurs  on  these  bonds  except  in  times  of  gre.it 
financial  depression  when  all  securities  are  reduced  in  market 
value.  The  loss,  therefore,  on  the  sale  of  these  securities  adds 
quite  a  percentage  to  the  actual  loss  under  the  bond.  This 
particular  feature,  or  added  loss  to  the  company,  is  not 
generally  understood  by  the  agents  and  solicitors,  and  has 
not  been  given  enough  consideration  in  the  past  when  solicit- 
ing these  bonds;  but  the  history  of  any  period  of  financial 
depression  will  bring  this  fact  forcibly  to  the  attention  of 
underwriters. 

Some  idea  may  be  formed  of  the  risk  assumed  under  De- 
pository Bonds  by  looking  at  the  statistics  of  national  banks 
operating  for  the  first  thirty-six  years  under  the  National 
Banking  laws  of  the  United  States.  During  the  period  from 
1864  to  1900,  wherein  there  were  numerous  panics,  statistics 
show  that  18%  of  all  the  national  banks  were  placed  in 
liquidation,  and  that  5%  of  all  such  banks  caused  loss  to  their 
depositors.  These  figures  apply  only  to  national  banks,  and 
unfortunately  no  satisfactory  data,  for  the  same  period,  can 
be  gathered  regarding  state  banks  and  trust  companies.  It 
is  a  known  fact,  however,  that,  as  the  examinations  of  the 
latter  institutions  are  less  rigid,  and  the  laws  governing  in- 
vestments and  reserves  considerably  more  lax  than  those  with 
which  national  banks  must  comply,  their  failures  are  more 
frequent.  Furthermore,  the  salvage  that  can  be  collected 
from  state  institutions  is  very  much  less  than  in  the  case  of 
depositaries  operating  under  Federal  laws.  Therefore,  from 
an  underwriting  viewpoint,  national  banks,  as  a  whole,  are 
better  risks  to  assume  than  state  banks  and  trust  companies, 
and  surety  companies  should  receive  a  larger  premium  and 
accept  a  smaller  liability  for  the  latter. 

Another  point  to  remember  is  that  each  Depository  Bond 
of  the  prompt  payment  class  is,  in  event  of  the  failure  of 

150 


FIDELITY  INSURANCE   AND   CORPORATE   SURETYSHIP. 

the  institution,  the  guarantee  or  endorsement  for  the  prompt 
payment  of  money.  Prompt  Payment  Depository  Bonds,  there- 
fore, should  be  classified  with  those  bonds  known  and  recog- 
nized by  surety  companies  as  "  financial  guarantees,"  such  as, 
Appeal  Bonds,  Attachment  Bonds,  etc.  (see  chapter  VII),  in 
executing  which  it  is  the  practice  of  all  companies  to  exact 
collateral  for  protection. 

As  can  be  well  understood,  the  proposition  of  exacting  col- 
lateral from  a  bank  to  protect  its  surety  on  a  Depository 
Bond  will  not  be  cordially  received,  but  as  the  self-same  in-, 
stitutions  are  accustomed  to  demand  collateral  from  their 
clients  to  whom  they  lend  money,  there  is  no  reason  why 
they  should  not  be  willing  to  furnish  collateral  to  the  surety 
signing  a  bond. 

When  taking  collateral  for  the  protection  of  the  surety 
in  the  execution  of  Depository  Bonds,  extreme  care  should  be 
exercised  to  see  that  it  is  so  hypothecated  as  to  prevent  legal 
complications  in  case  the  surety  desires  to  dispose  of  it  in 
event  of  loss.  This  can  be  done  by  a  careful  scrutiny  of 
the  bank's  charter  and  the  laws  of  the  state  in  which  the 
institution  is  situated.  This  will  show  whether  the  bank  can 
legally  pledge  its  securities  for  such  an  obligation. 

The  advisability  of  writing  large  single  risks,  which  call 
for  the  prompt  payment  of  money  needs  little  discussion. 
It  is  obviously  unwise  for  a  surety  carrying  a  large  line  of 
other  obligations  (which  of  course  implies  a  possible  demand 
upon  the  surety),  to  execute  Depository  Bonds  in  large 
amounts  on  any  one  institution,  or  a  chain  of  banks,  or  even 
to  write  a  large  number  of  Depository  Bonds  in  any  one 
locality,  where  the  failure  of  one  bank  might  cause  the  sus- 
pension of  others  in  the  same  section.  The  argument  brought 
to  bear  to  offset  this  is,  that  the  salvage  collected  from  de- 
funct banks  is  as  a  whole  very  much  larger  than  the  salvage 
collected  from  other  surety  losses.  While  this  may  be  true, 
the  collection  of  such  salvage  is  usually  delayed  from  one  to 
five  years,  and  in  the  meanwhile  the  company  may  be  seriously 

151 


FIDELITY  INSURANCE   AND   CORPORATE   SURETYSHIP. 

hampered  by  having  been  obliged  to  pay  the  money  promptly 
at  a  time  of  great  financial  depression. 

One  of  the  chief  objections  to  the  writing  of  Prompt  Pay- 
ment Bonds  is  that  they  are  usually  statutory  in  form,  and 
contain  many  undesirable  features  besides  that  requiring  the 
immediate  outlay  of  money.  For  instance,  in  the  statutory 
form  there  is  seldom  a  cancellation  clause,  which  means  that 
when  a  bond  is  once  issued,  there  is  no  possible  way  for  the 
surety  to  be  relieved  of  the  obligation,  even  though  it  should 
ascertain  that  the  bank  is  not  properly  managed;  so  that  the 
company  must  stand  liable  up  to  the  face  of  the  bond  as 
long  as  the  money  so  guaranteed  is  left  with  the  bonded  insti- 
tution. This  frequently  works  a  great  hardship  to  the  surety, 
and  many  companies  will  not  execute  any  form  of  depository 
bond,  unless  it  contains  either  a  cancellation  clause  or  states 
a  definite  term  of  liability. 

It  is  also  true  that  many  of  the  statutory  forms  of  bonds 
have  no  coinsurance  clause,  the  absence  of  which,  under 
certain  contingencies,  makes  the  surety  liable  for  an  amount 
considerably  in  excess  of  its  proportion  of  the  amount  on 
deposit,  on  account  of  the  failure  of  the  assured  to  have  other 
bonds  of  sufficient  size  or  through  the  insolvency  of  a  coinsur- 
ing  company. 

In  view  of  these  objectionable  features,  it  is  suggested  that 
all  agents  and  solicitors  agitate  the  question,  as  far  as  they 
are  able,  among  the  officials  of  their  various  states  and  cities, 
with  a  view  towards  securing  a  modification  of  the  laws  in 
such  a  way  as  to  enable  those  passing  upon  the  bonds  to 
accept  a  form  eliminating  these  objectionable  features. 

It  would  also  be  well,  when  soliciting  large  bonds,  to  see 
if  it  can  be  arranged  with  the  official  of  the  state,  county, 
or  municipality,  to  accept  separate  bonds  from  a  number  of 
sureties  in  such  amounts  as  they  are  willing  to  assume,  the 
sum  total  of  which  bonds  should  equal  the  total  amount 
required.  When  executing  these  separate  obligations,  how- 
ever, each  bond  should  contain  a  Coinsurance  Clause,  i.  e., 

152 


FIDELITY  INSURANCE   AND   COBPOBATE   SURETYSHIP. 

a  clause  stating  that  the  surety  will  pay  only  such  percentage 
of  the  loss  as  the  penalty  of  its  bond  bears  to  the  amount 
of  insurance  carried. 

2 — DEFERRED  PAYMENT  BONDS.* 

These  bonds  are  really  written  on  an  insurance,  or  eventual 
loss,  and  not  on  a  credit  or  banking  basis.  Though  it  is  true 
that  they  are  not  issued  as  frequently  as  Prompt  Payment 
Bonds,  they  are  considered  more  desirable  risks,  and  com- 
panies will  assume  larger  amounts  under  them  than  under 
the  former  obligations. 

The  Deferred  Payment  Bonds  will  frequently  be  satisfactory 
to  trustees,  beneficial  orders,  corporations  and  individuals,  or 
to  those  institutions  not  requiring  the  statutory  form  of  bond. 
As  above  explained,  the  eventual  loss  of  the  surety  there- 
under is  the  same  as  in  the  Prompt  Payment  Bond,  but  as 
the  surety  is  not  called  upon  to  pay  the  assured  until  after 
the  final  liquidation  of  the  defunct  institution  (which  is  usu- 
ally after  the  time  of  financial  stringency),  it  can  be  readily 
understood  that  not  only  can  a  larger  liability  be  carried, 
but  also  that  such  bonds  can  be  executed  at  a  less  rate  of 
premium. 

INFORMATION  REQUIRED  IN  WRITING  THESE  BONDS. 

The  information  required  by  the  surety  before  the  execu- 
tion of  any  Depository  Bond  is  that  furnished  by  the  last 
detailed  official  financial  statement  of  the  depository;  how 
the  loans  of  the  institution  are  divided  (i.  e.,  the  amount 
on  real  estate,  commercial  paper,  time  loans  on  stocks  and 
bonds,  call  loans  on  stocks  and  bonds,  especially  the  loans 
to  officers  and  directors,  and  the  amounts  for  which  they  are 
endorsers)  ;  whether  the  officials  and  directors  of  the  institu- 
tion are  men  of  large  means;  whether  they  are  connected  with 
large  mercantile  concerns;  and,  if  possible,  any  data  that  can 


See  Appendix,  page  228. 

153 


FIDELITY  INSURANCE   AND  CORPORATE   SURETYSHIP. 

be  secured  as  to  the  financial  strength  of  the  larger  stock- 
holders of  the  bank,  especially  in  those  states  where  the  stock- 
holders of  state  banks  and  trust  companies  have  a  "  statutory  " 
or  "  double  liability "  for  the  amount  of  their  stockholdings, 
as  is  the  case  with  national  banks.  As  before  stated,  the 
form  of  bond  required  should  be  carefully  examined. 

Experience  has  shown  that  where  the  connections  of  a 
bank  are  in  any  way  political,  a  thorough  investigation  should 
be  made  of  such  relations,  and  how  they  are  used  to  influence 
the  deposits  which  the  bonds  are  to  guarantee.  Where  such 
relations  exist,  it  should  be  seen  that  the  deposits  are  made 
on  account  of  the  financial  strength  of  the  institution  rather 
than  through  political  influence. 

It  may  be  well  to  state  that,  owing  to  the  interchange 
of  reinsurance  among  the  companies  for  this  line  of  busi- 
ness, practically  no  agent  should  be  authorized  to  execute 
these  bonds  without  specific  instructions  from  his  home  office; 
for  by  so  doing  he  might  assume  a  greater  liability  than  his 
company  would  care  to  carry,  especially  if  it  may  already, 
through  reinsurance,  have  taken  certain  liability  unknown 
to  the  agent. 


154 


APPENDIX. 


155 


APPENDIX. 


JOINT    CONTROL    AND    CONVERTIBLE    COLLATERAL. 

Joint  Control  accounts  arise  principally  in  the  execution  of 
Judicial  Bonds,  although  it  is  sometimes  necessary  for  the 
surety  to  secure  joint  control  of  funds  for  its  protection  in 
assuming  risks  of  some  other  character.  The  term  "joint 
control "  as  used  by  surety  companies  may  be  explained  as 
the  deposit  of  the  funds  of  an  estate,  or  trust,  to  the  joint 
control  of  the  fiduciary,  in  his  official  capacity,  and  the 
surety  by  its  agent. 

The  necessity  of  securing  Joint  Control  is  a  feature  of 
underwriting  not  generally  understood  by  agents  and  solici- 
tors, although  it  is  invariably  the  practice  of  surety  com- 
panies to  exact  this  requirement  in  executing  bonds  covering 
"  long  term  "  trusts. 

Statistics  show  that  losses  on  these  risks  have  been  heavy, 
and  the  best  method  of  checking  them  is  to  have  the  funds 
of  an  estate,  or  trust,  so  protected,  through  the  agent  of  the 
surety,  as  to  remove  any  chance  of  loss  either  by  defalcation 
on  the  part  of  the  fiduciary  or  by  mismanagement  of  the 
estate  or  trust  in  violation  of  law. 

Aside  from  the  purely  protective  feature  of  Joint  Control 
to  the  company,  it  has  another  reason  for  existing  which  is 
greatly  to  the  benefit  of  an  agent.  It  is  the  universal  prac- 
tice among  surety  companies  not  to  assume  larger  liability 
on  any  one  risk  than  10%  of  its  capital  and  surplus  except 
in  certain  cases  of  Warehouse,  Transportation  and  Internal 
Revenue  Bonds.  However,  if  a  company  can  protect  itself 
and  reduce  its  risks  by  making  a  proper  arrangement 
for  the  joint  control  of  accounts  with  the  fiduciary,  it 
greatly  diminishes  its  liability,  and  consequently  the  surety 

157 


FIDELITY  INSURANCE   AND   COEPOEATE   SURETYSHIP. 

would  feel  justified  in  assuming  very  much  larger  risks  than 
it  would  without  Joint  Control.  The  agent  may  also  solicit 
such  risks  without  being  hampered  by  the  policy  of  his  com- 
pany not  to  assume  more  than  10%  of  its  capital  and  sur- 
plus on  any  one  risk. 

For  the  convenience  of  their  agents,  surety  companies  fur- 
nish Joint  Control  Registers  to  facilitate  correct  and  readily 
understood  keeping  of  accounts  of  the  Joint  Control  trusts 
which  their  agents  handle.  In  keeping  such  accounts,  care 
should  be  taken  to  see  that  not  only  a  proper  description  of 
the  bond  is  made,  but  also  that  the  name  of  the  institution 
in  which  the  funds  are  to  be  deposited  and  the  name  of  the 
person  with  whom  the  agent  acts  in  the  joint  control  of  the 
estate  are  given.  Proper  notation  should  be  made  fully 
describing  the  estate  with  a  detailed  account  of  the  funds 
coming  into  the  hands  of  the  fiduciary,  so  that  all  receipts 
and  disbursements  can  be  promptly  and  properly  entered,  and 
the  total  amount  of  the  receipts  of  the  estate  at  all  times 
quickly  determined.  All  disbursements  should  be  charged 
promptly  and  properly,  so  that  the  exact  balance  of  the  funds, 
in  the  possession  of  the  fiduciary,  can  be  ascertained  at  a 
glance.  No  payments  should  be  made  in  the  Joint  Control 
account  except  such  funds  as  are  allowed  by  the  laws  of  the 
state  to  be  paid  out  of  such  trusts  upon  the  specific  author- 
ity and  order  of  court.  The  funds  of  the  estate  should 
be  so  deposited  in  bank  that  they  can  only  be  drawn  upon 
presentation  of  the  check  of  the  fiduciary  properly  counter- 
signed by  the  agent  of  the  surety  company.  If  they  are 
placed  in  a  safe  deposit  vault,  it  should  be  so  arranged  that 
access  may  only  be  had  in  the  presence  of  both  the  fiduciary 
and  the  agent  of  the  surety. 

For  his  own  protection,  as  well  as  that  of  the  surety,  an 
agent,  when  counter-signing  checks  for  Joint  Control  accounts, 

should  sign  his  name  as  agent  of  Surety  Company, 

and  when  safe  deposit  boxes  are  rented,  entry  should  be 

158 


FIDELITY  INSURANCE  AND   COEPOBATE  SURETYSHIP. 

made  on  the  books  of  the  safe  deposit  company  in  the  name 
of  the  agent,  as  agent,  and  not  in  his  individual  capacity. 

Inquiry  will  often  be  made  of  an  agent  for  a  statement 
as  to  the  balance  on  hand  of  the  various  Joint  Control  accounts 
as  handled  by  him,  as  these  accounts  should  be  verified,  from 
time  to  time,  by  the  court  officials  and  representatives  of 
surety  companies. 

COLLATERAL  REQUIRED  BY  COMPANY. 

For  its  very  necessary  protection,  a  surety  company  fre- 
quently exacts  collateral  before  the  execution  of  so-called 
"  financial  guarantee  "  bonds.  The  policy  of  securing  collateral 
must  not  be  confused  with  the  desire  of  a  company  to  obtain 
joint  control  on  all  long  term  trusts.  In  the  former  case,  of 
"  financial  guarantee  "  bonds,  the  surety  desires  full  and  abso- 
lute control  of  the  collateral,  while  in  the  latter  instance,  Joint 
Control  Bonds,  it  simply  desires  to  be  in  a  position  to  approve 
all  disbursements,  and  to  know  that  they  are  made  in  such  a 
manner  as  will  save  it  from  loss. 

The  method  of  handling  convertible  collateral,  received  as 
indemnity,  varies  considerably  among  different  companies.  As 
a  general  thing,  however,  all  companies  desire  such  collateral 
to  be  forwarded  promptly  to  the  home  office  by  registered 
mail  at  the  time  the  application  is  sent,  in  order  that  a 
proper  record  can  be  made  and  the  collateral  deposited  in 
the  company's  safe  deposit  vaults,  where  it  may  readily  be 
inspected  not  only  by  the  executives  of  the  company,  but 
also  by  the  various  examiners  of  the  state  Insurance  Depart- 
ments and  the  United  States  Government.  When  it  becomes 
absolutely  necessary,  or  is  the  policy  of  a  company  to  allow 
convertible  collateral  to  remain  in  the.  custody  of  an  agent, 
he  should,  for  his  own  protection,  see  that  an  arrangement 
is  made,  when  securing  a  safe  deposit  box,  that  such  box 
can  only  be  opened  in  the  presence  of  the  trust  officer  of  the 
institution  in  which  the  security  is  deposited.  Possibly  the 
trust  officer  may  not  care  to  accept  responsibility  for  the 

159 


FIDELITY  INSURANCE  AND   CORPORATE   SURETYSHIP. 

justification  of  returning  any  collateral  so  deposited,  but  he 
will  undertake  to  keep  a  proper  record  of  the  same  for  the 
advice  of  the  home  office. 

It  is  hardly  necessary  to  say  that  in  the  Joint  Control 
accounts,  other  than  those  of  a  fiduciary  nature,  collateral 
or  money  held  as  indemnity  should  not  be  returned  to  the 
owner  without  receiving  specific  authority  from  the  home 
office  for  such  disposal,  unless  the  surety  has  received  suf- 
ficient legal  evidence  that  its  liability  under  the  particular 
guarantee  for  which  the  collateral  was  given  has  terminated 
and  ceased. 

IMPORTANCE  OF  ANSWERING  INQUIRIES  FROM  THE 
HOME  OFFICE. 

Perhaps  the  most  frequent  complaint  that  agents  make  in 
regard  to  handling  Fidelity  and  Surety  Bonds  is  caused  by 
the  numerous  inquiries  they  constantly  receive  from  their 
home  office,  or  general  agents,  regarding  the  status  of  risks 
which  have  been  executed.  The  agent  should  remember,  how- 
ever, that  he  receives  his  compensation,  be  it  in  the  form 
of  a  commission  or  in  some  other  way,  for  rendering  just 
such  service,  and  that  his  company  is  entitled  to  his  best 
efforts  in  answering  promptly  any  inquiry  concerning  any 
risk.  These  inquiries  have  been  proven  essential  from  ex- 
perience, and  it  has  been  found  that  many  losses  can  be 
saved  by  properly  following  and  keeping  in  touch  with  bonds 
after  their  execution.  Prompt  attention  before  the  expira- 
tion of  the  term  of  the  bond  may  result  in  removing  diffi- 
culties and  misunderstandings,  which  may  exist,  and  which,  if 
allowed  to  continue,  would  mean  loss  to  the  surety. 

If  the  principal  of  the  bond  is  acting  in  a  fiduciary  capacity 
under  the  direction  of  a  court,  or  in  case  he  is  a  contractor 
or  public  official,  he  may  be  advised  or  cautioned  from  time 
to  time,  and  his  affairs  kept  in  order,  if  the  surety  is  aware 
of  the  exact  conditions.  The  various  forms  of  inquiry  in  use 

160 


FIDELITY  INSURANCE  AND  CORPOBATE   SURETYSHIP. 

are  one  of  the  means  which  the  surety  has  of  apprising  itself 
of  such  conditions. 

The  information  requested,  from  time  to  time,  also  serves 
another  purpose.  A  surety  company  always  places  a  limit 
as  to  the  amount  of  liability  which  it  is  willing  to  assume 
on  any  particular  applicant,  and  as  in  certain  lines  many 
bonds  are  required  by  the  same  applicant,  the  surety  can 
best  determine  definitely  how  much  more  liability  it  may 
properly  assume  by  learning  exactly  how  much  it  is  carry- 
ing by  means  of  the  necessary  inquiries. 

CLASSIFICATION  OF  INQUIRIES. 

The  various  inquiries  emanating  from  home  offices  will 
be  taken  up  under  the  following  heads: 

1 — INQUIRIES     CONCERNING    FIDELITY     OBLIGATIONS. 

Inquiries  of  this  nature  are  not  as  numerous  as  those  upon 
other  kinds  of  bonds,  and  most  of  them  arise  when  the  appli- 
cant, from  the  moral  point  of  view,  is  shown  by  the  original 
investigation  to  be  near  the  danger  line,  although  the  com- 
pany has  accepted  the  risk.  In  such  cases  it  is  customary, 
from  time  to  time,  to  make  additional  investigation  by  means 
of  requests  to  determine  whether  the  principal,  as  a  risk,  is 
improving  or  deteriorating.  Except  for  this  reason,  there 
will  be  very  few  requests  for  information  regarding  Fidelity 
Bonds,  other  than  that  required  under  the  usual  form  of 
expiration  notice,  which  is  drawn  to  provide  for  a  certificate 
of  correctness  and  examination  of  accounts  before  a  renewal 
certificate  is  issued.  In  securing  these  certificates,  it  should 
be  the  first  duty  of  an  agent  to  refer  to  his  files  and  see 
that  the  statement  made  conforms  with  the  warrant  given 
by  the  employer  at  the  time  of  execution  of  the  original  bond. 

2 INQUIRIES    CONCERNING    CONTRACT    OBLIGATIONS. 

Inquiries  upon  bonds  of  this  character  are  designed  to  keep 
the  home  office  informed  whether  the  work  in  connection 

161 


FIDELITY  INSURANCE  AND  CORPORATE   SURETYSHIP. 

with  which  the  bond  was  given  has  been  completed,  or  if 
not,  what  percentage  has  been  finished,  the  probable  date  of 
completion,  and  the  amount  of  money  which  has  been  paid 
upon  the  contract.  It  is  necessary  for  the  surety  to  know 
whether  the  contract  is  proceeding  in  a  satisfactory  manner 
and  whether  the  contractor  has  finished  as  great  a  percentage 
of  work  as  he  is  called  upon  to  do  by  the  terms  of  his  contract. 

As  construction  contracts  frequently  provide  a  penalty  for 
non-completion  of  the  work  at  a  certain  date,  these  inquiries 
give  a  definite  idea  regarding  the  probable  exaction  of  such 
penalty,  and  by  considering  the  percentage  of  work  completed 
and  the  amount  of  money  paid  on  the  contract,  the  surety 
can  tell  whether  it  will  be  necessary  to  take  steps  to  urge 
the  contractor  to  greater  efforts  or  whether  the  operations 
are  proceeding  satisfactorily.  If  a  contractor  is  slow  and 
behind  time  in  his  work,  he  can  frequently  be  made  more 
energetic,  if  properly  approached,  and  thus  complete  on 
time.  If  this  cannot  be  done  on  account  of  weather  or  other 
conditions,  the  influence  of  the  surety  can  be  put  forth  to 
assist  in  obtaining  an  extension  of  time  and  thus  prevent  the 
exaction  of  the  non- completion  penalty.  Even  in  cases  where 
there  is  no  penalty  provided  for  non-completion,  if  the  con- 
tractor is  slipping  behind  in  his  work  and  losing  money,  he 
can  frequently  be  helped  along  by  the  surety  in  many  ways 
which  may  serve  to  save  him  from  default  on  the  contract, 
provided  the  surety  has  knowledge  of  his  difficulty  in  proper 
time. 

By  referring  to  the  chapter  on  Contract  Constructural 
Bonds,  it  will  be  noticed  that  the  relative  amount  of  liability 
a  surety  company  cares  to  assume  on  a  particular  contractor 
is  based,  among  other  things,  on  the  amount  of  uncompleted 
work  in  hand.  It  is,  therefore,  obvious  that  if  contract  in- 
quiries are  promptly  answered,  and  the  necessary  data  fur- 
nished, it  greatly  facilitates  the  underwriting  of  further  bonds 
on  the  contractor's  behalf,  and  frequently  enables  an  agent 


FIDELITY  INSURANCE  AND   CORPORATE   SURETYSHIP. 

to  extend  to  his  clients  a  larger  line  of  credit  than  would 
be  possible  if  the  home  office  were  not  absolutely  in  touch 
with  the  status  of  the  various  operations  undertaken. 

3 — INQUIRIES   CONCERNING   JUDICIAL  OBLIGATIONS. 

The  information  required  on  judicial  risks  is  the  most 
annoying  for  an  agent  to  secure,  but  it  is  absolutely  neces- 
sary for  the  surety  to  obtain  it,  and  if  the  agent  uses  proper 
care  and  promptness,  he  may  save  himself  a  great  deal  of 
trouble  which  would  otherwise  ensue. 

Referring  to  the  Indemnity  Agreements  which  are  signed  by 
applicants  to  the  various  companies  for  Judicial  Bonds,  it 
will  be  seen  that  there  is  a  distinct  provision  that  the  appli- 
cant will  furnish  the  company  with  copies  of  all  court  papers 
which  he  is  required  by  law  to  file,  and  it  is  only  when  this 
provision  is  not  enforced  that  difficulty  arises.  As  the  type- 
writer is  in  such  general  use,  it  should  be  a  very  easy  matter 
for  any  agent  to  comply  with  the  requests  of  the  home  office 
by  instructing  his  client  to  furnish  him  with  a  carbon 
copy  of  all  papers  filed  in  every  case.  The  time  for  filing, 
accountings,  etc.,  varies  in  the  different  states,  and  it  is 
necessary  for  an  agent  to»  familiarize  himself  with  the  laws 
and  rules  of  the  courts  in  his  territory.  If  he  has  this  in- 
formation at  hand,  he  can  make  such  notes  on  his  current 
calendar  as  will  enable  him  to  secure  the  necessary  data 
from  his  clients,  and  to  forward  it  to  the  home  office  at 
the  proper  time.  An  agent  should  never  forget  that  the 
surety  is  not  warranted  in  cancelling  a  Judicial  Bond  on  a 
mere  verbal  statement  of  either  the  applicant  or  his  attorney, 
and  as  the  applicant  has  agreed,  in  writing,  to  furnish  the 
surety  with  a  copy  of  the  court  release,  or  to  pay  an  annual 
premium  until  he  does  so,  the  agent  is  expected  to  see  that 
either  one  or  the  other  of  these  things  is  done.  Prompt  atten- 
tion to  this  will  save  his  office  from  many  inquiries  it  would 
otherwise  be  necessary  to  send. 

163 


FIDELITY    INSURANCE   AND   CORPORATE    SURETYSHIP. 
4 — INQUIRIES  CONCERNING  PUBLIC  OFFICIAL  OBLIGATIONS. 

Such  inquiries  as  are  made  concerning  these  bonds  are  ren- 
dered necessary  by  the  fact,  that  according  to  the  various 
laws  under  which  public  officials  operate,  there  are  certain 
stated  intervals  at  which  they  are  required  to  make  state- 
ments of  their  accounts  and  have  same  verified.  The  home 
office  makes  note  of  these  intervals,  and  when  such  reports 
and  examinations  are  due,  will  call  upon  the  agent  to  get 
certified  copies  of  same,  and  to  verify  the  bank  balances  men- 
tioned therein.  If  a  public  official  is  properly  checked  up 
by  this  means,  experience  has  shown  that  not  only  can  defal- 
cations be  prevented,  but  faulty  office  systems  discovered, 
and  in  most  cases  so  remedied  as  to  benefit  both  the  surety 
and  the  state,  county  and  municipality  in  whose  favor  the 
bond  runs. 

As  in  judicial  cases,  the  applicant  agrees  to  furnish  the 
surety  with  all  information  which  is  essential  when  he  signs 
his  application.  It  is  only  necessary,  therefore,  for  the  agent 
to  make  this  fact  impressive  and  to  enforce  this  agreement 
to  take  care  of  the  requests  of  his  home  office  in  this  line. 

5 — INQUIRIES   CONCERNING   DEPOSITORY   OBLIGATIONS. 

Less  trouble  will  be  experienced  in  responding  to  inquiries 
from  the  home  office  on  risks  of  this  class  than  is  the  case 
with  other  risks.  As  most  of  the  requests  are  for  the  various 
quarterly  or  semi-annual  statements  of  the  institution  covered 
by  the  bond,  the  agent  should  make  arrangements  when  the 
bond  is  executed  for  the  bank  to  put  his  name  upon  the  mail- 
ing list,  and  send  such  statements  to  him  whenever  they  are 
issued.  As  in  other  lines  of  business,  the  information  con- 
tained in  these  statements  may  often  be  such  as  to  make  the 
company  feel  that  it  is  warranted  in  assuming  greater  liability 
on  behalf  of  a  particular  principal,  and  for  this  reason,  if 
for  no  other,  the  agent  should  give  such  matters  his  closest 
and  most  careful  attention. 

164 


FIDELITY   INSURANCE  AND   CORPORATE   SURETYSHIP. 

AGENT'S  OFFICE  ORGANIZATION. 

The  general  organization  of  an  agency  to  handle  the  fidelity 
and  surety  business  does  not  differ  very  materially  from  that 
of  an  up-to-date  fire  or  casualty  insurance  agency. 

In  the  preceding  pages  of  this  manual  it  has  been  un- 
doubtedly noticed,  that  there  are  such  differences  between 
fidelity,  surety,  and  the  other  lines  of  general  insurance  busi- 
ness as  to  make  necessary  a  definite  office  system.  The  home 
office  systems  of  the  different  surety  companies,  though 
similar,  differ  somewhat  in  detail.  Generally  speaking,  as 
soon  as  possible  after  the  agent  is  appointed,  his  office  should 
be  organized  in  accordance  with  the  system  of  the  home  office 
of  his  company. 

FILING    SYSTEM — COPIES,   ETC. 

In  installing  a  filing  system  it  will  be  well  to  file  copies  of 
every  application  and  the  papers  connected  with  them  in  an 
individual  jacket.  This  should  be  numbered,  and  in  addition, 
a  card  index  should  be  installed  by  which  these  papers  can 
be  readily  referred  to  by  number,  thereby  enabling  cross  in- 
dexing when  necessary. 

The  object  in  keeping  copies  of  an  application  and  other 
papers  is  to  enable  the  agent,  in  the  event  of  any  trouble, 
to  refer  at  once  to  his  own  files  and  secure  the  information 
necessary  for  the  consideration  of  any  problem  that  may  come 
up  in  reference  to  a  bond  that  has  been  executed.  It  will  be 
found  that  this  is  particularly  advantageous  in  case  of  any 
difficulty  under  a  Contract  or  a  Fidelity  Bond,  where  prompt 
action  is  frequently  necessary.  In  the  latter  case,  in  many 
instances,  the  answers  of  the  applicant  as  to  property  held 
by  himself,  parents,  location  of  family,  etc.,  may  be  very 
useful  in  giving  such  quick  information  as  may  be  neces- 
sary to  apprehend  a  defaulter  or  bring  about  a  satisfactory 
settlement. 

All  general  correspondence  between  the  agent  and  the  home 
office  not  in  connection  with  any  particular  application  should 

165 


FIDELITY  INSURANCE  AND   CORPORATE   SURETYSHIP. 

be  filed  under  separate  headings  divided  with  regard  to  the 
various  departments  of  the  home  office.  This  should  be  in- 
dexed and  cross  indexed,  so  as  to  enable  the  agent  to  readily 
locate  correspondence  on  any  general  subject  pertaining  to 
the  business.  Most  home  offices  require  correspondence  to 
be  directed  to  the  departments  by  title  in  order  to  expedite 
the  handling  of  the  business. 

INDEX    SYSTEM. 

Such  an  index  system  should  be  inaugurated  as  will 
bring  to  the  attention  of  the  agent  notices  of  the  ex- 
piration dates  of  the  various  bonds  in  force,  and  also  the 
dates  when  there  is  due  from  the  agent  to  the  home  office 
specific  information  in  any  of  the  classes  of  bonds  referred 
to  in  previous  chapters.  By  rigidly  adhering  to  this  system 
much  trouble,  annoyance  and  unnecessary  correspondence  will 
be  saved  the  agency.  This  applies  especially  to  Contract, 
Judicial  and  Public  Official  Bonds. 

PROMPTNESS    IN    CORRESPONDENCE. 

It  is  hardly  necessary  to  state  that  all  correspondence 
should  be  promptly  answered.  If  the  information  asked  for 
cannot  be  promptly  given,  the  letter  should  be  acknowledged 
and  a  date  set  when  the  information  desired  can  be  furnished. 

SEPARATE    ACCOUNTS    FOR    FIDELITY    AND    SURETY   BUSINESS. 

A  separate  and  complete  set  of  accounts  should  be  kept  for 
the  fidelity  and  the  surety  business.  This  should  be  done  be- 
cause of  the  fact  of  the  different  manner  of  handling,  renew- 
ing and  collecting  premiums  in  each  of  these  classes  of  busi- 
ness, and  also  in  order  to  facilitate  the  adjusting  of  accounts 
between  the  agent  and  his  home  office. 

COLLECTION  OF  PREMIUMS. 

The  collection  of  premiums  is  a  very  important  factor  in 
the  success  of  any  agency.  It  will  be  well  for  the  agent  to 

166 


FIDELITY   INSURANCE  AND   CORPORATE   SURETYSHIP. 

keep  a  memorandum  showing  all  outstanding  accounts,  which 
will  enable  him  to  keep  in  touch  with  the  outstanding  pre- 
miums and  greatly  facilitate  the  collection  of  same. 

ORGANIZATION    OF   TERRITORY. 

If  an  agent  is  operating  an  extensive  territory,  it  is 
of  importance  that  he  should  organize  his  territory  by 
the  appointment  of  sub-agents,  especially,  in  the  county 
seats  from  which  a  great  part  of  the  business  in  his 
territory  will  come.  The  agent  should  not  only  instruct 
the  sub- agents  as  to  the  proper  office  organization  in  their 
own  offices,  but  should  also  organize  his  own  office  in  such 
a  way  as  to  enable  him  to  properly  work  with  his  sub- 
agencies.  This  can  be  done  in  various  ways,  as  for  instance, 
by  notifying  them  of  the  letting  of  contracts,  and  furnish- 
ing other  information,  also  coaching  the  sub-agents  as  to 
where  and  how  the  business  should  be  obtained.  Where  it 
has  been  found  necessary  to  issue  to  such  a  sub-agent  a  power 
of  attorney  for  the  execution  of  any  form  of  bond,  the  agent 
cannot  lay  too  much  emphasis  on  the  fact  of  the  grave  respon- 
sibility then  resting  on  the  subordinate,  for  most  bonds  when 
once  issued  cannot  be  cancelled.  This  is  different  from  most 
of  the  other  lines  of  insurance,  which  permit  cancellation  of 
the  risk  by  notice.  The  individual  responsibility,  therefore,  in 
representing  a  fidelity  or  surety  company  is  many  times 
greater  than  that  placed  upon  any  one  occupying  a  like  posi- 
tion in  the  companies  handling  any  of  the  other  lines  of  in- 
surance, and  this  important  fact,  as  well  as  the  gravity  of 
the  situation  that  may  arise  in  deviating  a  particle  from  the 
instructions  of  the  home  office,  should  be  firmly  planted  in 
the  minds  of  both  the  agent  and  sub-agent. 

THE  ART  OF  SOLICITING. 

There  have  been  many  articles  written  on  the  subject  of 
the  different  ways  of  soliciting  insurance  and  the  various 
qualifications  and  characteristics  that  go  to  make  up  an  in- 

167 


FIDELITY  INSUBANCE  AND   CORPORATE   SURETYSHIP. 

surance  solicitor.  The  general  practises  and  policies  used 
in  other  soliciting  work  can  be  applied  to  the  soliciting  of 
bonds.  As  stated  in  a  previous  chapter,  bonds  are  generally 
given  under  compulsion  or  requirement  and  not  voluntarily. 
This  greatly  facilitates  the  soliciting  of  this  particular,  line  of 
business.  A  solicitor,  in  order  to  keep  in  touch  with  prospec- 
tive clients,  should  make  up  a  card  index,  which  should  cata- 
logue all  contractors,  lawyers,  bankers,  merchants  and  manu- 
facturers in  his  territory.  He  should  make  the  personal  ac- 
quaintance, if  possible,  of  each  individual  on  his  list,  with  a 
view  of  forming  connections  that  will  enable  him  to  secure 
their  business.  When  a  client  is  once  secured,  an  effort  should 
be  made  to  get  from  him  introduction  by  letter  or  otherwise 
to  others  for  similar  purposes.  This  applies  particularly 
to  contractors  and  lawyers.  In  the  case  of  an  expiring  bond 
that  has  to  be  renewed,  about  a  month  before  the  date  of 
expiration  all  the  influence  possible  should  be  brought  to 
bear  on  the  assured,  for  the  purpose  of  enabling  the  agent 
to  secure  the  renewal  of  the  obligation. 

It  is  also  well  for  solicitors  to  form  the  acquaintance  of 
the  architects  in  their  territory,  from  whom  a  great  deal  of 
information  can  be  obtained  in  regard  to  prospective  building 
enterprises.  This  information  can  be  turned  to  great  advan- 
tage in  soliciting  for  business. 

It  will  be  noted,  by  reference  to  various  chapters  of  this 
manual,  that  there  are  many  bonds  required  by  statute  or 
some  local  municipal  regulations,  which,  as  a  rule,  are  re- 
written at  a  specific  or  fixed  date.  In  these  cases  a  list  of 
the  firms,  etc.,  who  are  about  to  rewrite  these  obligations 
should  be  made,  and  they  should  be  communicated  with 
through  the  best  channels  for  the  purpose  of  securing  their 
patronage. 

It  is  also  desirable  before  any  election,  either  general  or 
local,  to  get  in  touch  with  the  different  candidates,  with  the 
view  of  obtaining  their  Official  Bonds  and  the  bonds  of  those 

168 


FIDELITY  INSURANCE  AND   CORPORATE   SURETYSHIP. 

connected  with  their  offices,  in  case  they  are  successful.  This 
also  applies  to  those  who  receive  office  through  appointment, 
whether  national,  state  or  otherwise. 

If  a  system  of  careful  card  indexing  with  its  proper  follow- 
ing up  system  is  adopted,  a  solicitor  will  find  that  in  a 
comparatively  short  time  he  will  be  enabled  to  build  up  a 
lucrative  business. 


169 


"  DON'TS," 
OR  FAMILIAR  HINTS  TO  AGENTS. 


For  emphasis  and  ready  reference  a  few  agency  "  don'ts " 
are  here  set  out.  They  are  not  necessarily  noted  in  the  pre- 
ceding pages  as  some  refer  to  phases  of  the  fidelity  and  surety 
business  not  heretofore  touched  on. 

DON'T: 

deceive  your  company.    Give  it  the  benefit  of  every  doubt 
•    — it  pays  in  the  end. 

forget  you  are  the  "  eyes  "  and  "  ears  "  of  your  company, 
and  you  shoujd  furnish  full  facts  on  first  intimation  of 
trouble. 

forget  that  the  valuable  agent  is  the  one  who  tries  to 
protect  his  company's  interests. 

neglect  to  work  in  an  endeavor  to  get  the  confidence  of 
your  home  office.  When  this  has  been  obtained,  things 
are  bound  to  run  smoothly. 

write  on  more  than  one  subject  in  a  letter.  This  facili- 
tates filing  in  home  office  and  promptness  in  reply. 

offer  business  to  your  home  office  which  you  know  will 
be  declined.  You  lose  one  of  your  best  assets,  their  confi- 
dence, by  so  doing. 

accept  and  recommend  to  your  company,  risks  that  other 
companies  have  declined.  If  you  submit  such  a  propo- 
sition, tell  all  about  it  and  why  it  was  declined  by  the 
other  company. 

170 


FIDELITY  INSUKANCE  AND  CORPORATE    SURETYSHIP. 

DON'T: 

ignore  the  company's  requests  for  information  as  to  the 
progress  of  work,  etc.  This  is  most  important  for  the 
completion  of  the  home  office  records,  and  for  other 
reasons. 

overlook  the  fact  that  your  company  is  selling  in  most 
cases  "  credit "  or  "  service,"  and  is  not  supposed  to 
take  any  risk. 

fail  to  familiarize  your  company  with  all  local  condi- 
tions surrounding  each  risk  submitted.  This  will  insure 
prompt  service. 

think,  because  a  competitive  agent  is  after  a  piece  of 
business  it  will  necessarily  be  approved  by  his  home  office. 

lose  sight  of  the  fact  that  the  home  office  underwriters 
are  not  mind  readers.  Give  full  and  authentic  infor- 
mation with  each  proposition,  so  it  may  be  acted  on 
intelligently. 

think  you  know  it  all.  There  are  others,  and  they  have 
had  experience  too. 

forget  the  importance  of  having  the  principal  understand 
the  amount  of  premium  to  be  paid.  It  will  save  you 
endless  trouble. 

take  a  back  seat  in  the  management  of  your  business. 
Be  the  head  and  front  of  the  business.  That's  where 
you  belong. 

"knock"  your  competitors.  Meet  them  in  a  fair  and 
square  contest,  and  let  the  best  man  win. 

ask  the  company  to  write  a  bond  that  you  would  not  be 
willing  to  become  surety  for  yourself, 
allow  your  account  to  become  overdue.    Any  agent  behind 
in  his  accounts  does  not  stand  in  the  good  graces  of  his 
home  office. 

171 


FIDELITY  INSURANCE  AND   CORPORATE   SURETYSHIP. 

DON'T: 

overlook  the  fact  that  there  is  no  cancellation  clause  in 
Surety  Bonds,  and  a  risk  once  assumed  cannot,  if  deter- 
mined undesirable,  be  cancelled. 

fail  to  remember  that  it  is  the  little  bonds  that  never 
ought  to  be  written,  that  aggregate  a  large  portion  of 
the  annual  losses  paid  by  surety  companies. 

let  anyone  tell  you  that  a  bond  is  a  matter  of  form  and 
no  liability.  It  is  a  delusion  and  a  snare. 

let  anyone  persuade  you  to  write  a  bond  against  your 
better  judgment. 

execute  any  bond  under  your  power  of  attorney1  in  excess 
of  the  10%  limit  of  your  company,  without  proper  ar- 
rangements for  taking  care  of  such  excess. 

fail  to  submit  every  doubtful  proposition  to  the  home 
office  for  approval.  Execute  no  bonds  unless  absolutely 
certain  that  they  are  all  right. 

exceed  your  power  of  attorney.  Follow  closely  all  letters 
of  instructions. 

overlook  the  fact  that  several  courts  have  held  an  agent 
personally  responsible  for  loss  sustained,  where  the  agent 
exceeded  his  instructions. 

forget  to  send  a  copy  of  each  bond  executed,  at  the  time 
of  forwarding  the  application. 

write  "  financial  guarantees,"  without  cash  or  market- 
able securities. 

write  bonds  for  negroes  or  ignorant  foreigners. 

fail  to  see  that  the  applicant  and  employer  fill  out  the 
statements  in  their  own  handwriting.  Never  fill  out  such 
papers  for  them;  this  is  important. 

172 


FIDELITY   INSURANCE   AND   CORPORATE    SURETYSHIP. 

DON'T: 

take  anything  for  granted.  Verify  the  applicants'  cash 
in  bank  and  real  estate  holdings;  this  is  most  important. 

forget  the  importance  of  investigating  the  financial  stand- 
ing of  an  applicant,  and  of  posting  yourself  as  to  Home- 
stead laws  and  married  woman's  rights. 

fail  to  have  the  company's  printed  form  of  bond  accepted 
wherever  possible  and  make  no  erasure  on  same  without 
authority  from  home  office. 

fail  to  see  that  all  papers  are  properly  and  legally  wit- 
nessed. When  in  doubt,  ask  your  attorney. 

allow  any  interlineation  on  any  papers.  If  necessary,  see 
that  such  changes  are  legally  done. 

alter  a  signed  instrument  (even  verbally),  without  au- 
thority from  your  home  office. 

agree  to  an  assignment  or  transfer  of  an  interest  in  any 
bond  without  consent  of  home  office.  By  so  doing  you 
may,  among  other  things,  release  the  indemnitor,  co- 
sureties or  re-insurers  of  the  risk. 

overlook  the  necessity,  when  taking  the  indemnity  of  a 
corporation,  to  see  that  the  corporation  is  in  a  legal 
status  to  give  it. 

take  personal  bonds  of  indemnity.  They  fade  away  over- 
night. Get  something  tangible — then  you  are  sure. 

forget  to  beware  of  the  "guess  work"  financial  state- 
ments. If  an  applicant  does  not  keep  such  a  set  of 
books  as  to  give  you  a  correct  detailed  financial  state- 
ment, his  business  methods  are  such  as  to  make  him  an 
undesirable  risk. 

overlook  the  necessity  of  collecting  premium  upon  the 
delivery  of  bond.  This  is  for  the  protection  both  of 
your  client  and  your  company. 

173 


FIDELITY   INSURANCE   AND   CORPORATE    SURETYSHIP. 

DON'T: 

delay  the  service  of  cancellation  notices  on  the  assured 
when  requested  by  the  home  office. 

get  the  idea  that  on  a  "  shady  "  or  doubtful  line  of 
business,  volume  will  take  care  of  losses. 

write  Fidelity  Bonds — let  the  home  office  do  it  for  you. 

write  a  bond  on  any  contract  in  which  you  are  person- 
ally interested. 

overlook  the  "  Rush  Order ''  Contractor's  Bond.  As  a 
rule  the  contractor  is  either  too  careless  to  be  a  good  risk 
or  his  bond  has  been  declined  by  another  company. 

write  a  bond  for  a  contractor,  who  has  on  hand  as  much 
work  as  he  can  properly  finance;  "too  much  work  on 
hand  "  has  been  the  cause  of  many  a  contractor's  down- 
fall. 

write  bonds  when  there  is  a  great  difference  between  the 
figures  of  the  bidders. 

write  bonds  for  a  contractor,  if  he  is  to  receive  anything 
but  money  in  payment  for  his  work. 

write  bonds  guaranteeing  cost  of  building  when  contrac- 
tor works  on  percentage. 

write  bonds  on  building  ana  loan  schemes. 

write  Court  Bonds,  which  guarantee  the  payment  of 
money  under  certain  contingencies  without  security. 

fail  to  secure  Joint  Control  on  all  "long  term  trusts." 
The  company's  interests  are  then  protected. 

forget  that  Joint  Control  carelessly  exercised  is  very 
dangerous  and  worse  than  none  as  a  protection  to  your 
company. 

issue  bonds  for  fiduciaries  on  partially  administered 
estates. 

174 


FIDELITY   INSURANCE   AND   CORPORATE    SURETYSHIP. 

DON'T: 

forget  that  in  some  jurisdictions  that  a  debt  due  an 
estate  by  the  fiduciary  is  an  asset  for  which  the  surety 
is  liable. 

write  Fiduciary  Bonds  for  women  without  Joint  Control. 

submit  bonds  for  "  holdover  "  public  officials,  who  handle 
and  have  the  custody  of  large  sums  of  money. 

expect  your  company  to  write  for  one  premium  charge 
a  Public  Official  Bond  that  guarantees  not  only  an  appli- 
cant's honesty  and  faithful  performance  of  duty,  but  also 
the  solvency  of  the  bank  or  banks  wherein  funds,  coming 
into  his  hands,  are  placed  on  deposit. 

fail  to  absorb  the  company's  reasons  for  turning  down  a 
risk.  It  will  enable  you  to  steer  clear  next  time. 

forget  in  case  of  a  claim  the  importance  of  not  commit- 
ting or  compromising  your  company  without  authority 
from  your  home  office.  Awkward  situations  may  thus 
be  avoided.  Better  consult  your  attorney. 

sit  in  the  office  and  expect  business  to  come  to  you.  There 
are  others  after  i*  every  minute.  Be  the  "live  wire," 
the  man  "  on  the  job." 

get  "  premium  crazy "  and  contract  the  disease  known  in 
surety  circles  as  "  premiumitis." 

forget  that  good  business  judgment,  energy  and  loyalty 
to  your  company  are  your  best  business  assets. 


175 


SPECIMEN  FORMS. 


SAMPLE   APPLICATION   FORM  USED   FOR  GEN- 
ERAL EMPLOYEES,  AGENTS,  ETC. 

I   hereby   make   application  for   a  bond   for   $  to  date  from 

190  .  1.  Give  name  in  full  Age  years. 

2.    Residence    (Street    and    Number).  .  3. 

City    and    State?  .  4.    Where    and    when    born? 

5.   If  a  foreigner,   state  how  long  you  have  resided  in  this  country 

6.    Married    or    single?  .  7.    Father 

Occupation  (If    parents    are    deceased,    give    namc-s    and    ad- 

dresses     of     some     male     relatives.)  Address  .  8. 

Mother  Address  .  9.    To   whom   is   the   bond   to   be 

fiven?      (Give  exact  title  of  firm,  company  or  organization) 
0.   Home  office  of   employer?  .  11.   What  will   be   your 

business  address?  .  12.  What  is  the  nature  of  the  busi- 

ness  carried   on  by  your  employer?  .  13.   What  will  be 

your   title   in   the   position   you   will   occupy?  .  14.    State 

the    duties    of    this    position  .  15.    How    long    have    you 

been  in  the  service  of  the  above  employer?     From  .  16. 

In   what   positions?  .  17.   How   long   in   the   position   for 

which   bond    is    now    required?  .  18.    Who   will    pay   the 

premium  for  this  bond?  .  19.  Have  you  previously  given 

bond   to    the    above   employer?  .  20.    Who    furnished    it? 

Amount?  $  .  21.  Why  was  it  discontinued? 

22.  Has  your  application  for  a  bond  ever  been  declined? 

23.  By  whom?  .  24.   What  salary  or  compensation   will 
you  receive?     $              .  25.  Are  you  responsible  for  any  por- 
tion of  losses  that  may  be  occasioned  by  bad  credits  given?     Give 
particulars              .              26.  Have  you  income  other  than  your  sal- 
ary as  above  stated?     $  .  27.  From  what  source? 

28.   Do   you  own  real  estate  in  your  own  name?     If  so,   state  fol- 
lowing particulars : 


LOCATION. 

DESCRIPTION. 

VALUE. 

INCUMBRANCE. 

$ 

$ 

29.  Do  you  own  any  personal   estate?  Value?  $ 

30.  Are    your   parents    possessed    of    any    property?  Value?    $ 

31.   State  amount  of  your  debts  and  liabilities  other 
than    liens   on   property,    $  .  32.    If   other   than   current 

176 


FIDELITY   INSUKANCE   AND   CORPORATE    SURETYSHIP. 


bills,   explain   nature  of  your  debts   and   state  what  effort  you  are 
making  to  liquidate  the  same  .  33.  Are  you  member  of 

any  club  or  fraternal  association?     Give  names  and  locations 

34.  How  many  persons  are  dependent  upon  you  for  support? 

35.  Is    your    life    insured?  To    what    amount?      $  State 
nature  of  policies,  name  of  companies  and  to  whom  payable 

36.  Do  you  ever  engage  in  speculative  transactions?  Of  what 
nature?              .              37.  Do  you  use  intoxicating  liquors  as  a  bev- 
erage?             .              38.    Did    you   ever   use   them    to    excess? 

How    long    since?  .  39.    Were    you   ever    in    business   on 

your    own    account?  Where?  .  40.    When?      From 

to  .  41.    Reason    for    discontinuing    same? 

42.    Did    you    ever    make    an    assignment    for    the    benefit    of    your 
creditors?  .  43.  When?  What  settlement  was  made? 

44.  Will  you  have  any  business  interests  other  than 
those  incident  to  the  position  for  which  this  bond  is  required?  Give 
particulars 

Please  fill  in  the  following  schedule  the  particulars  of  your  employment 
during  the  past  ten  years,  and  previous  thereto,  if  any,  having  care  to  cover 
the  full  disposition  of  your  time,  whether  employed  or  out  of  work. 

If  not  in  business  during  the  entire  period,  give  dates,  names  and  ad- 
dresses of  your  school  teachers. 


177 


FIDELITY   INSURANCE   AND   CORPORATE    SURETYSHIP. 


*llll 

v  v>  v  &  <2 

ill  11 


*-"  (N  CO  •*  »O 

178 


t^        oo       a>       o 


FIDELITY  INSURANCE  AND  COBPOBATE   SUBETYSHIP. 

REFERENCES. 

Give  at  Least  Five.     Write  Names  and  Addresses  Plainly. 
Do   Not  Give   Former  Employers   as   References. 


NAMES. 

OCCUPATION. 

P.  O.  ADDRESS. 

1 

2  . 

3 

4 

5 

In  consideration  of  the  company  issuing  the  bond  for  which 

application  is  hereby  made,  I  do  hereby  agree  and  bind  myself, 
my  heirs,  executors  and  administrators,  to  pay  the  premium  or 
fees  hereafter  agreed  upon,  to  wit:  dollars  ($  )  per 

annum,  in  advance,  while  said  bond  shall  continue  in  force ;  and 
to  reimburse  the  said  company  for  all  loss,  costs,  damages,  charges 
and  expenses  whatever,  resulting  from  any  act,  default  or  neglect 
of  mine,  that  said  company  may  sustain  or  incur  by  reason  of 
having  executed  said  bond,  or  any  renewal  or  continuation  thereof. 
And  I  do  further  agree  that  the  vouchers,  or  other  evidence  of  pay- 
ment of  such  loss  paid  by  said  company  to  tfie  employer  under 
such  obligation  together  with  vouchers  or  other  evidence  of  pay- 
ment of  all  costs  and  expenses  whatever,  incurred  by  said  com- 
pany in  adjusting  said  loss,  shall  be  taken  as  conclusive  evidence 
against  me  and  my  estate  of  the  fact  and  extent  of  my  liability 
under  said  obligation  to  the  said  company. 

I  further  agree  that  said  company  may  decline  to  issue  said 

bond  hereby  applied  for,  and  in  case  it  does  issue  said  bond,  it 
shall  have  the  right  to  withdraw  or  cancel  the  same  whenever  it 
shall  see  fit ;  and  in  any  event  the  company  shall  not  be  required 
to  disclose  the  reasons  upon  which  its  action  is  based  and  shall 
not  be  responsible  for  any  loss  or  damage  that  I  may  sustain  by 
reason  of  such  action. 

In  testimony  whereof,   I   hereunto  subscribe  my  name  this 
day  of  A.  D.,  190     . 

Witness : 

(Signature.) 


PHYSICAL  DESCRIPTION  OP  APPLICANT. 

Applicant    will    please    fill    out    this    blank. 

Age  Height  Weight  Complexion  Color    of 

eyes  Color  of  hair  Color  of  mustache  Color  of  beard 

Birth-marks,    prominent    scars    or    other    distinguishing    fea- 
tures 

179 


FIDELITY  INSURANCE  AND  CORPORATE   SURETYSHIP. 

SAMPLE  EMPLOYER'S  STATEMENT  FORM  USED 
FOR  GENERAL   EMPLOYEES,  AGENTS,  ETC. 

An  application  has  been  made  to  this  company  to  issue  a  bond 
of  security  for  Mr.  as  in  your  service,  at  to  the 

amount   of    $ 

The  company  desires  to  have  answers  to  the  following  questions, 
and  these  answers  will  be  taken  as  the  basis  of  the  bond  if  issued. 

1.  To  whom  is  the  bond  to  be  made  payable?     (Give  exact  title.) 
2.   From  what  date  is  it  to  be  written,  and  for  what 
amount?    $  .  3.  Who  will  pay  the  premium? 

4.  How  long  have  you  known  the  applicant?  How  long  has  he 

been   in    your   employ?  Have  you   knowledge   of   any   habit  of 

the   applicant   or   any   circumstance   unfavorable   to   the   issuance   of 
the  bond  applied  for?     If  so,  state  particulars  .  5.  What 

salary  will   he  receive?  How  and  when  will   same  be  paid  to 

him?  .  6.    What   will    be    the    title   of    applicant's    posi- 

tion? Explain  fully  his  duties   in  connection  therewith 

7.   If  his  duties  embrace  the  custody  of  cash,   state  largest  amount 
likely  to  be  in  his  custody  at  any  one  time.  For  what  length 

of  time  is  he  apt  to  have  control  of  such  amount?  .  8. 

Will  he  be  authorized  to  pay  out,  of  the  cash  in  his  custody,  any 
amounts  on  your  account?  In  what  manner  is  such  authority 

given?  .  9.    Is    he    required   to    make   deposits   in    bank; 

if    so,    how    often  ?  Give    name    of    the    depository.  State 

whether  he  is   allowed  to  endorse  checks  drawn  to  your  order,  and 
for  what   purpose.  Is   he  authorized   to  accept  drafts  on   your 

behalf?  .  10.   Will   he   be   authorized   to    sign  .checks   on 

your   behalf?  Will    the   countersignature   of   any   other   person 

be  invariably  required;  if  so,  whose?  .  11.  To  whom  will 

he   account   for    his   handlings    of   funds    and    securities?  How 

frequently  will  he  make  settlements?  .  12.   What  means 

will  you  use  to  ascertain  whether  his  accounts  are  correct?  How 

frequently  will  they  be  examined?  .  13.  When  were  his 

accounts    last   examined?  .  14.    Were   they   at  that   time 

in   every  respect  correct,   and   proper   securities  and   funds  on  hand 
to  balance?  .  15.  Is  there  now,  to  your  knowledge,  any 

shortage  due  you  by  applicant?  Has  he  ever  been  short  with 

you?  .  16.  Is  he  now  in  debt  to  you?  If  so,  state 

amount   and   nature    of   such.  .  17.    Have   you   ever   sus- 

tained loss  through  the  dishonesty  of  any  one  holding  the  position 
of   the   applicant?  .  18.   If   so,   state  amount   and  nature 

of   such.  .  19.   Will   you   require   additional   surety   from 

the    applicant    other    than    the    amount    applied    for    to    this    com- 
pany? If  so,  state  amount  and  by  whom  given 

It  is  agreed  that  the  above  answers  are  to  be  taken  as  con- 
ditions precedent  and  as  warranties  in  the  said  bond  applied  for, 
or  any  renewal  or  continuation  of  the  same  that  may  be  issued 
by  the  company  to  the  undersigned,  upon  the  person  above 

named. 

Dated  at  this  day  of  19         .  Signature  of 

employer  ,  by  ,  official  capacity. 

This  form  must  be  returned  to  the  Home  Office  before  the  bond 
will  be  issued. 

180 


FIDELITY   INSURANCE  AND   CORPORATE   SURETYSHIP. 

SAMPLE  EMPLOYER'S  STATEMENT  FORM  USED 
FOR  BANK  EMPLOYEES. 

To    the    President    of    the  Bank, 

An  application   has  been  made  to  this  .company  to   issue  a  bond 
of    security   for    Mr.  as  in    your    service    to    the    amount 

of   $ 

The  company  desires  to  have  answers  to  the  following  questions, 
and  these  answers  will  be  taken  as  the  basis  of  the  bond  if  issued. 

1.  To  whom  is  the  bond  to  be  made  payable?     (Give  exact  title.) 
State    capital    and    resources    of    bank.    Capital    $  De- 

posits    $  .  Surplus     $  Undivided     profits     $ 

Has    the    bank    a    State    charter?  Date  .  2.    Prom 

what  date  is  bond  to  be  written,  and  for  what  amount?  What 

further  security,  if  any,  will  be  required  from  applicant?  Who 

will  pay  the  premium  for  the   bond  required?  .  3.   How 

long   have   you   known   the   applicant?  How   long   has   he  been 

in   the   bank's   service?  Has   he   hitherto   furnished  security  to 

the  bank?  If  so,   who  furnished   it?  If  not,   why  is  this 

bond    required?  .  4.    Has   the   applicant   uniformly   given 

satisfaction  in   his  personal  conduct  and  habits?  Has  he  kept 

his  accounts  correctly  and  made  proper  settlements  of  all  cash  and 
securities    entrusted    to    his    care?  .  5.    Is    he    now,    or 

has   he  been,   from  any  cause  indebted  to  the  bank  or   its  officers? 
If    so,    give    particulars,    stating    amount,    how    incurred    and 
how    payment    is    secured.  .  6.    Is   he   now,    or    about   to 

be  engaged  or  interested  in  any  other  business  or  employment,  than 
in    the    bank's    service?  If    so,    does    the    bank    approve    such 

division    of    interest    or    occupation.  .  7.    What    will    be 

the   title    of    applicant's   position?  Explain    fully    his    duties    in 

connection   therewith.  .  8.   What  salary   will  he  receive? 

9.  In  case  of  the  applicant  acting  as  teller,  will  he 
be  required  to  balance  his  cash,  daily,  and  report  same  to  presi- 
dent or  cashier?  Will  a  record  of  such  report  be  kept? 
10.  Will  the  applicant  have  access  to  the  treasury  of  the  bank? 
If  so,  under  what  restrictions?  .  11.  In  case  of 
applicant  handling  cash  or  securities,  how  often  will  the  same 
be  examined  and  compared  with  the  books,  accounts  and  vouchers, 
and  by  whom?  .  12.  At  what  date  and  by  whom  were 
applicant's  books  and  accounts  (including  cash,  securities  and 
vouchers,  if  any),  last  inspected  and  examined?  Were  they 
at  th'at  time  in  every  respect  correct,  and  proper  securities  and 
funds  on  hand  to  balance?  .  13.  Are  the  pass  books 
of  your  depositors  periodically  balanced?  How  often? 
By  what  employee  of  the  bank?  .  14.  Does  the  bank 
require  its  bookkeepers  to  change  ledgers?  If  so,  at  what 
periods?  .  15.  At  what  date  was  the  bank  last  exam- 
ined in  person  by  a  National  or  State  official?  Was  the  re- 
sult of  such  examination,  so  far  as  known  to  the  bank's  officers 
and  directors,  entirely  satisfactory  to  that  official? 
16.  If  the  active  staff  of  the  bank  consists  of  six  or  less,  please 
state  respective  positions. 

It   is    agreed    that   the   above    answers    are   to   be    taken    as   con- 
ditions precedent  to  and  as  warranties  in  the  said  bond  applied  for, 

181 


FIDELITY   INSURANCE   AND   CORPORATE    SURETYSHIP. 


or  any  renewal  or  continuation  of  the  same  that  may  be  issued 
by  the  company  to  the  undersigned,  upon  the  person  above 

named. 

Dated  at  this  day  of  19  .  Bank,  by 

,  official  capacity. 

This  form  must  be  returned  to  the  Home  Office  before  bond  will 
be  issued. 


SAMPLE  APPLICATION  FORM  FOR  SOCIETIES, 
BENEFICIAL  ORDERS,  ETC.,  FOR  SECRE- 
TARIES, TREASURERS  AND  OTHER  OFFI- 
CIALS WITH  EMPLOYER'S  STATEMENT  AT- 
TACHED. USED  FOR  BONDS  OF  LESS 
THAN  $1,000. 

I    hereby   make    application    for    a   bond   of   $  ,    as  of 

and   affirm  that  in   the  following   declarations  made,    I   state 
the   truth   without   reservation. 

1.    Name   of   applicant  .  2.    Age  Single   or    mar- 

ried .  3.  Residence   (Street  and  Number)  City  and 

State  .  4.    How    long    a    member    of    this    organization? 

5.  Did  you  previously  occupy  this  position?  How 

long?  .  6.    By   whom   are   your    accounts    examined,    and 

at  what  periods?  .  7.  Are  you   engaged  in   any  business 

or     other     employment?       Give     particulars  Business     address 

8.   If  an  employee,  give  name  and  address  of  present 
employer  Length  of  time  in  above  employ  .  9.   Do 

you  own  any  real  or  personal  estate?  Value?  $ 

10.   State  amount  of  your  debts  and  nature  of  same,  $ 

In  consideration  of  the  company  issuing  the  bond  for  which 

application  is  hereby  made,  I  do  hereby  agree,  and  bind  myself,  my 
heirs,  executors  and  administrators,  to  reimburse  the  said  com- 

pany for  all  loss,  costs,  damages,  charges  and  expenses  whatever, 
resulting  from  any  act,  default,  or  neglect  of  mine,  that  said 
company  may  sustain  or  incur  by  reason  of  having  executed  said 
bond  or  any  renewal  or  continuation  thereof.  And  I  do  further 
agree  that  the  vouchers,  or  other  evidence  of  payment  of  such 
loss  paid  by  said  company  to  the  employer  under  such  obligation 
together  with  vouchers  or  other  evidence  of  payment  of  all  costs 
and  expenses  whatever,  incurred  by  said  company  in  adjusting 

said  loss,  shall  be  taken  as  conclusive  evidence  against  me  and 
my  estate  of  the  fact  and  extent  of  my  liability  under  said  obliga- 
tion to  the  said  company. 

I  further  agree  that  said  company  may  decline  to  issue  said 

bond  hereby  applied  for,  and  in  case  it  does  issue  said  bond,  it 
shall  have  the  right  to  withdraw  or  cancel  the  same  whenever 
it  shall  see  fit ;  and  in  any  event  the  company  shall  not  be  re- 
quired to  disclose  the  reasons  upon  which  its  action  is  based  and 
shall  not  be  responsible  for  any  loss  or  damage  that  I  may  sustain 
by  reason  of  such  action. 

In  testimony  whereof,   I   hereunto   subscribe  my  name  this 
day    of  A.    D.,    19 

Witness:  (Signature.) 

182 


FIDELITY   INSUBANCE  AND   CORPORATE   SURETYSHIP. 


STATEMENT   OF   THE   EXECUTIVE   OFFICER  OF   THE   ORDER   RELATIVM 
TO  THE  BOND  HEREIN  APPLIED  FOR. 

1.   To  whom   is  bond   to  be   made  payable?    (Exact  title.) 
2.    Amount   of   bond   required,   $  To   date   from  .  3. 

Have   the   books   and   accounts   of   the   applicant  or   his   predecessor 
been    examined    and    found    correct?  If   so,    up   to   what   date, 

and    by    whom?  .  4.    Has    he    previously    occupied    this 

position?  If    so,    did    he    perform    his    duties    and    render    his 

accounts    satisfactorily?  .  5.    Is    the    applicant    now,    or 

has   he   ever   been   short,    in   arrears   or   default  in   his   accounts  to 
this   order? 

It  is  agreed,  on  behalf  of  the  order  to  which  the  bond  applied 
for  shall  run,  that  the  above  answers  are  to  be  taken  as  condi- 
tions precedent  to  and  as  warranties  in  said  bond  applied  for,  or 
any  renewal  or  continuation  of  the  same  that  may  be  issued  by 
the  company  to  the  said  order,  upon  the  person  above  named. 

Dated    at  this  day    of  19       .  Name    and 

number  of  order  By 

(Signature.) 

(The  signature  of  the  officer  signing  this  should  b«  attested  by  the 
seal  of  the  order  or  association.) 


SAMPLE  APPLICATION  FORM  FOR  SOCIETIES, 
BENEFICIAL  ORDERS,  ETC.,  FOR  SECRE- 
TARIES, TREASURERS  AND  OTHER  OFFI- 
CIALS WITH  EMPLOYER'S  STATEMENT  AT- 
TACHED. USED  FOR  BONDS  OF  $1,000  AND 
OVER. 

Application    for    bond    of    $  to    be    given    to  in    the 

position     of  .  1.     Name     of     applicant  Age 

2.    Residence    (Street   and   Number)  .  3.    City   and   State 

4.    Business    address  .  5.    Single    or    mar- 

ried? .  6.    How    long    a    member    of    this    organization? 

7.    Title    of    applicant    in    position    for    which    bond 
is    required?  .  8.    What    are   your    duties    in    this    office? 

(Supply    extracts    from    Constitutions    and    By-laws)  .  9. 

How   long   have  you   held   this  position?  .  10.   Has   your 

application  to  any  company  for  a  Fidelity  Bond  ever  been  declined? 
If  so,  state  name  of  company  and  particulars  .  11. 

What  amount  of  money  will  you  handle  during  the  year  in  this 
position?  $  .  12.  Largest  amount  apt  to  be  under  your 

control    at    any    time?      $  .  13.    Where    are    funds    de- 

posited? .  14.    By    whom    is    the    depository    designated? 

15.   In  what  name  are   the   above  mentioned  deposits 
kept?  .  16.   Are  you  empowered  to  draw  or  check  upon 

such   deposits?  .  17.    If    so,    is    countersignature    of    any 

one   required,    and   of   whom?  .  18.    By   whom    are   your 

accounts  examined,   and   at  what  periods?  .  19.   Are  you 

allowed  to  make  payments  in  cash  from  the  funds  of  the  Asso- 
ciation? If  so,  state  particulars  .  20.  What  is  your 
compensation,  and  how  is  same  paid?  .  21.  Are  you 

183 


FIDELITY   INSURANCE   AND   CORPORATE   SURETYSHIP. 


engaged    in    any   business    or   other   employment?      Give   particulars 
22.    If   an   employee,   give   name  of   present   employer 

Address  .  23.    Length    of    time    in    above    employ 

24.    State    amount    of    annual    income    from    business 

or   employment,    $  .  25.    Do   you    own    any    real    estate? 

Value?   $  .  26.   Do  you   own  any  personal  estate? 

Value?    $  .  27.     Is    there    any    encumbrance    on 

your   property?  Amount?    $  .  28.    State   amount  of 

your    debts    and    liabilities    other    than    liens    on    property. 
$  .  29.   How  many  persons  are  dependent  upon  you  for 

support?  .  30.     Is     your     life     insured?  To     what 

amount?  State  nature  of  policies  and  to  whom  payable 


Give  at  Least  Five. 

REFERENCE. 
Write  Names  and  A< 

Idresses  Plainly. 

NAME. 

STREET  ADDRESS. 

CITY  AND  STATE. 

1.            

2  

3  

4  

5 

In  consideration  of  the  company  issuing  the  bond  for  which 

application  is  hereby  made,  I  do  hereby  agree,  and  bind  myself,  my 
heirs,  executors  and  administrators,  to  pay  the  premium  or  fees 
hereafter  agreed  upon,  to  wit:  dollars  ($  )  per  annum, 

in  advance  while  said  bond  shall  continue  in  force,  and  to  reimburse 
the  said  company  for  all  loss,  costs,  damages,  charges  and  ex- 

penses whatever  resulting  from  any  act,  default,  or  neglect  of  mine, 
that  said  company  may  sustain  or  incur  by  reason  of  having 

executed  said  bond  or  any  renewal  or  continuation  thereof.  And  I  do 
further  agree  that  the  vouchers,  or  other  evidence  of  payment  of  such 
loss  paid  by  said  company  to  the  employer  under  such  obligation 
together  with  vouchers  or  other  evidence  of  payment  of  all  costs 
and  expenses  whatever,  incurred  by  said  company  in  adjusting 

said  loss,  shall  be  taken  as  conclusive  evidence  against  me  and 
my  estate  of  the  fact  and  extent  of  my  liability  under  said  obliga- 
tion to  the  said  company. 

I  further  agree  that  said  company  may  decline  to  issue  said 

bond  hereby  applied  for,  and  in  case  it  does  issue  said  bond, 
shall  have  the  right  to  withdraw  or  cancel  the  same  whenever 
it  shall  see  fit ;  and  in  any  event  the  company  shall  not  be  re- 
quired to  disclose  the  reasons  upon  which  its  action  is  based  and 
shall  not  be  responsible  for  any  loss  or  damage  that  I  may  sustain 
by  reason  of  such  action. 

In  testimony  whereof,   I   hereunto  subscribe  my  name  this 
day    of  A.    D.,    19 

Witness:  .  .  ( Signature. ) 

184 


FIDELITY  INSURANCE  AND   CORPORATE   SURETYSHIP. 

PHYSICAL  DESCRIPTION  OF  APPLICANT. 
Applicant  will  please  fill  out  this  blank. 

Age  Height  Weight  Complexion  Color    of 

eyes  Color  of  hair  Color  of  mustache  Color  of  beard 

Birth-marks,    prominent    scars    or    other    distinguishing    fea- 
tures 

STATEMENT    RELATIVE    TO   THE    BOND    PROPOSED    TO    BE    GIVEN    BY 

COMPANY 
Chief   executive   officer  of  the  order,   please  fill  out   this  blank. 

1.    On    behalf    of    Mr.  .  2.    In   the    position    of 

3.    Bond   is   to   be   made  payable  to  .  4.    Address 

5.     Amount    of    bond,     $  to    date    from  19       .  6. 

Premium   to   be   paid   by  .  7.    Is   the    applicant  now,   or 

has    he    been    from    any    cause,    in    arrears    to    this    order? 
8.   Give  particulars  .  9.   What  compensation  will   he  re- 

ceive? .  10.    From    whom,    or    from    what    sources,    will 

he    receive    moneys?  .  11.    What    will    probably    be    the 

largest  amount  in  his  possession  at  any  one  time?     $v  . 
12.  What  disposition  will  he  make  of  funds  coming  into  his  hands? 
13.    Will    he    be    required    to    deposit    moneys    in    a 
special   bank    account?  .  14.    If   so,    give   name   of   bank 

15.  Who  will  designate  the  bank  to  be  used? 

16.    In    what    name    will    such    account    be    kept?  .  17. 

What    official    signatures   will    be    required    on    checks    to   withdraw 
funds?  .  18.    Will   he   be   authorized   to   pay  out,   of   the 

cash  in  his  custody,  any  amounts  on  your  account?  Give  par- 

ticulars .  19.  To  whom  will  he  account  for  his  handling 

of   funds    and    securities?  .  20.    How    frequently   will    he 

make   settlements?  .  21.   How   often   will   his   books   and 

accounts  be   audited   and   verified   with  funds   on   hand   or  in  bank, 
and  by  whom?  .  22.  When  was  the  last  audit  of  appli- 

cant's  account   made?  .  23.   Were   they   at  that  time   in 

every  respect  correct  and  funds  on  hand  to  balance? 

It  is  agreed  that  the  above  answers  are  to  be  taken  as  condi- 
tions precedent  to  and  as  warranties  in  the  said  bond  applied  for 
or  any  renewal  or  continuation  of  the  same  that  may  be  issued 
by  the  company  to  the  undersigned,  upon  the  person  above 

named. 

Dated   at  this  day   of  19       .  Name   of   or- 

der   or    association  By  ,  official    capacity. 

(The  signature  of  the  officer  signing  this  should  be  attested  by 
the  seal  of  the  order  or  the  association.) 


SAMPLE  APPLICATION  FORM  FOR  MISCEL- 
LANEOUS FIDELITY  CASES. 

1.    Name   of    applicant  Age  .  2.    Single   or   mar- 

ried? .  3.    Residence?  .  4.    Business    address? 

5.    Give    exact    title    of    firm,    organization    or    indi- 
vidual to  whom  bond  is  to  be  given  .  6.  Address? 
7.    Amount  of   bond   required?      $              .              8.    From   what   date 
is  bond  to  be  written?              .              9.  For  what  term? 
10.    Give    below    full    information    regarding    the    character    of    the 
guarantee    required:                            11.    What    is    your   compensation, 

185 


FIDELITY   INSURANCE  AND   CORPORATE   SURETYSHIP. 


and   how   is   same  paid?  .  12.   Are   you   engaged   in   any 

other   business?  (If   so,    state   character   of   same   and    income 

therefrom)  .  13.     Give    description    and    value    of    your 

real    and    personal    property,    and    state    amount   of    encumbrance,    if 
any,    thereon:  .  14.    Do   you    carry    life    insurance?      (If 

so,    state   amount  and   character   of   policies  and   to   whom   payable.) 
15.    The   following   statement   of   the   financial    condition    of   appli- 
cant   is    made    for    the    purpose    of    inducing    the  company    to 
execute   the   bond   hereby    applied   for : 


ASSETS. 

PRESENT 
MARKET 
VALUE. 

LIABILITIES. 

AMOUNT, 
AT 
DATE. 

Cash  on  hand  
Cash  in              .          Bank 

Borrowed    or    due    on 
Stocks  and  Bonds  .  .  . 
Borrowed     or     due     on 
Real  Estate  
Encumbrance  on  plant. 

... 

Stocks  and  Bonds  

Real  Estate,  and  where 
located 

Accounts  payable  

Other     liabilities,     give 
particulars  

Plant  

Accounts  receivable  ..... 

Other    assets,    give    par- 

Bank  Reference:. .  . 


16.  Give  the  names  and  addresses  of  four  or  more  persons,  not 
related  to  you,  who  have  known  you  for  some  years  past,  writing 
names  and  addresses  distinctly. 

I  certify  that  the  answers  given  to  the  foregoing  interrogatories 
are  true  ;  and  in  consideration  of  the  company  executing  bond 

herein  applied  for,  I  do  hereby  covenant,  promise  and  agree  to 
pay  the  premium  or  fees  hereafter  agreed  upon,  viz  :  ($  ) 

per  annum,  in  advance,  made  by  the  company  for  executing 

said  bond,  and  continuing  the  same,  until  said  company  shall, 

in  the  manner  provided  by  law,  be  discharged  or  released  from 
any  and  all  liability  and  responsibility  upon  and  from  said  bond 
and  all  matters  arising  therefrom,  and  proper  legal  evidence  of 
such  discharge  or  release  be  served  on  the  company  and 

to  pay  the  said  company  any  and  all  loss,  costs,  charges,  suits, 
damages,  counsel  fees  and  expenses  of  whatever  kind  or  nature, 
which  said  company  shall  or  may,  for  any  cause,  at  any  time, 
sustain  or  incur,  or  be  put  to,  for  or  by  reason,  or  in  consequence 
of  said  company  having  entered  into  or  executed  said  bond. 

I  further  agree  that  said  company  may  decline  to  issue  said 

bond  hereby  applied  for,  and  in  case  it  does  issue  said  bond,  shall 
have  the  right  to  withdraw  or  cancel  the  same  whenever  it  shall 

186 


FIDELITY   INSURANCE   AND   CORPORATE    SURETYSHIP. 


see  fit ;  and  in  any  event  the  company  shall  not  be  required  to 
disclose  the  reasons  upon  which  its  action  is  based  and  shall  not 
be  responsible  for  any  loss  or  damage  that  I  may  sustain  by  reason 
of  such  action. 

In  testimony  whereof,   I   hereunto  subscribe  my  name  this 
day    of  A.    D.f    19 

Witness:  .  .  Applicant. 


SAMPLE    FORM    OF    INDIVIDUAL    FIDELITY 
BOND. 

ISSUED  TO   INDIVIDUALS   OR  FIRMS   COVERING  LARCENY  OR 

EMBEZZLEMENT. 
(The  wording  is  changed  slightly  when  issued  to  corporations.) 

Whereas,  (hereinafter    called    the    "  employee  ")     has    been 

appointed   to   the   position   of  in   the    service   of  (herein- 

after called  the  "employer  "),  and  has  been  required  to  furnish 
a  bond  for  his  honesty  in  the  performance  of  his  duties  in  said 
position.  And 

Whereas,    the    employer    has    delivered    to    the  Company,    a 

corporation    of    the    State    of  ( hereinafter   called    the    "  com- 

pany "),  certain  statements  and  certificates  in  writing  relative  to 
the  duties,  responsibilities  and  accounts  of  the  employee,  the 
manner  of  conducting  the  business  of  the  employer,  and  the  man- 
ner of  checking  and  verifying  the  accounts  of  said  employee,  and 
other  matters  connected  with  the  issuance  of  this  bond,  which 
together  with  any  other  statements,  certificates  and  agreements 
in  writing,  made,  or  to  be  made  by  the  employer,  and  required 
by  or  lodged  with  the  company,  do  and  shall,  constitute  the  basis 
of  this  contract,  or  any  continuation  thereof,  and  are  hereby  made 
a  part  hereof  the  same  as  if  herein  incorporated. 

Now,     therefore,     in    consideration    of    the    sum    of  dollars 

($  )    paid   as   a   premium   for  the  period  from  to 

at  twelve  o'clock  noon,  and  upon  the  faith  of  the  aforesaid  state- 
ments, certificates  and  agreements  of  the  employer,  the  truth  of 
which  said  employer  does  hereby  warrant. 

It  is  hereby  agreed  and  declared,  that,  subject  to  the  war- 
ranties hereinbefore  mentioned,  and  the  provisions,  conditions  and 
agreements  herein  contained,  the  truth  of  which  warranties,  and  the 
fulfillment  of  which  provisions  and  agreements  shall  be  conditions 
precedent  to  the  right  of  the  employer  to  recover  under  this  bond, 
the  company  shall,  at  the  expiration  of  three  months  next  after 
satisfactory  proof  of  a  pecuniary  loss,  as  hereinafter  mentioned, 
reimburse  the  employer,  to  the  extent  of  the  sum  of  dollars 

($  ),  and  no  further,  for  such  pecuniary  loss  as  the  employer 

shall  have  sustained  by  any  act  of  larceny  or  embezzlement  on 
the  part  of  the  employee  in  the  performance  of  the  duties  of  the 
office  or  position  in  the  service  of  the  employer  hereinbefore  re- 
ferred to,  as  the  same  have  been,  or  may  hereafter  be,  stated  in 
writing  by  the  employer  to  the  company,  and  occurring  during 
the  continuance  of  this  bond,  and  discovered  during  said  con- 
tinuance or  within  six  months  thereafter,  or  in  case  of  the  death, 
resignation  or  removal  of  the  employee  prior  to  the  expiration  of 
this  bond,  within  six  months  after  such  death,  resignation  or 
removal. 

187 


FIDELITY  INSURANCE  AND   CORPORATE   SURETYSHIP. 


It  is  further  agreed  and  declared,  that  this  bond  may  be  con- 
tinued from  year  to  year,  at  the  option  of  the  employer,  at  the 
same  or  an  agreed  premium  rate,  so  long  as  the  company  shall 
consent  to  receive  the  same,  in  which  event  the  company  shall 
remain  liable  for  any  act  of  larceny  or  embezzlement  committed  by 
the  employee  between  the  original  date  of  this  bond  and  the  time 
to  which  it  shall  have  been  continued ;  Provided,  that  the  liability 
of  the  company  as  surety  for  the  employee  to  the  employer  shall 
not  exceed  the  amount  above  written,  whether  the  loss  shall  occur 
during  the  term  above  named,  or  during  any  continuation  or  con- 
tinuations thereof,  or  partly  during  the  said  term  and  partly  during 
said  continuation  or  continuations ; 

That  the  employer  shall  immediately  give  the  company  notice 
in  writing,  by  a  registered  letter,  addressed  to  the  president  of  the 
company,  ,  ,  of  the  discovery  of  any  act  which  may  be 

made  the  basis  of  any  claim  hereunder,  and  shall  file  with  the 
company  his  itemized  claim  hereunder  at  his  own  cost  and  ex- 
pense, with  full  particulars  thereof,  duly  sworn  to  within  three 
months  thereafter.  And  any  claim  which  shall  not  be  filed 
by  the  employer  with  the  company  within  six  months  after 
the  expiration  or  cancellation  of  this  bond,  or  within  six  months 
after  the  employee  shall  have  ceased  to  be  in  the  employer's  ser- 
vice, shall  not  be  payable  hereunder.  And  upon  the  making  of 
such  claim,  this  bond  shall  wholly  cease  and  determine  af;  regards 
any  liability  for  any  act  of  the  employee,  committed  subsequent 
to  the  discovery  of  such  loss,  and  this  bond  shall  be  surrendered 
to  the  company  on  payment  of  such  claim. 

That  the  employer  shall  at  once  notify  the  company  on  becom- 
ing aware  that  the  employee  is  engaging  in  speculation,  gambling, 
or  in  any  disreputable  or  unlawful  habits  or  pursuits. 

That  if  the  employer  shall  at  any  time  hold  concurrently  with 
this  bond,  or  represent  to  the  company  in  any  statement  or  declara- 
tion to  it,  that  he  does  or  will  at  any  time  hold  concurrently  with 
this  bond,  any  other  bond  or  guarantee  of  security  from  or  on  behalf 
of  the  employee,  the  employer  shall  be  entitled  in  the  event  of 
loss  as  hereinbefore  stated,  to  claim  hereunder  only  such  pro- 
portion of  the  loss  as  the  amount  covered  by  this  bond  bears  to 
the  whole  amount  of  security  carried,  or  so  stated  as  carried  or 
to  be  carried  on  the  employee's  behalf,  whether  the  employer  shall 
be  able  to  reimburse  himself  from  such  other  bond  or  guarantee  so 
carried,  or  stated  to  be  carried  or  not,  or  whether  the  same  has 
been  allowed  to  lapse  or  not. 

That  if  the  company  shall  so  elect,  this  bond  may  be  cancelled 
at  any  time  by  giving  one  month's  notice  to  the  employer,  and 
refunding  the  premium  paid,  less  a  pro  rata  part  thereof,  for  the 
time  this  bond  shall  have  been  in  force,  remaining  liable  for  any 
act  or  acts  covered  by  this  bond,  which  may  have  been  committed 
by  the  said  employee,  up  to  the  date  of  such  determination,  and 
discovered  and  notified  to  the  company  within  the  limit  of  time 
hereinbefore  provided  for. 

That  the  employer  shall,  if  so  required  by  the  company,  duly 
apply  for  a  warrant  for  the  arrest  of  the  employee  for  any  act 
of  larceny  or  embezzlement  which  is  the  basis  of  any  claim  here- 
under, giving  all  the  aid  and  information  in  his  power  (at  the 
cost  and  expense  of  the  .company)  to  bring  the  said  employee  to 
justice  or  to  aid  the  company  to  sue  for  or  obtain  reimbursement 
from  the  employee,  his  estate  or  a  third  person,  of  the  moneys 
which  the  company  has  paid  or  become  liable  to  pay,  by  virtue 
of  this  bond. 

188 


FIDELITY   INSURANCE   AND   CORPORATE    SURETYSHIP. 


That  if  the  employer  shall  entrust  the  employee  with  money, 
securities,  or  other  personal  property,  after  having  discovered  any 
act  of  dishonesty  or  shall  condone  any  act  for  which  the  company 
may  be  liable  hereunder ;  or  shall  make  any  settlement  with  the 
employee  for  any  loss  hereunder,  without  previous  notice  to  and 
consent  of  the  company  thereto,  this  bond  shall  be  null  and  void, 
and  any  wilful  misstatement  or  suppression  of  facts  in  any  claim 
made  hereunder  renders  this  bond  void  from  the  beginning. 

That  any  suits  at  law  or  proceedings  in  equity  brought  against 
this  bond,  to  recover  any  claim  hereunder,  must  be  instituted  and 
process  served  upon  the  company  within  twelve  calendar  months 
next  after  the  first  notice  of  said  claim  is  filed  with  the  company. 

That  the  company,  upon  the  execution  of  said  bond,  shall  not 
thereafter  be  responsible  to  the  employer  under  any  bond  previously 
issued  to  the  employer  on  behalf  of  said  employee,  and  upon  the 
issuance  of  any  bond  subsequent  hereto  upon  said  employee  in 
favor  of  said  employer,  all  responsibility  hereunder  shall  cease  and 
determine,  it  being  mutually  understood  that  it  is  the  intention 
of  this  provision  that  but  one  (the  last)  bond  shall  be  in  force 
at  one  time,  unless  otherwise  stipulated  between  the  employer  and 
the  company,  and  the  company  shall  in  no  event  be  liable  in  respect 
of  any  shortage  existing  at  the  commencement  of  this  bond  or  for 
funds  or  property  used  to  make  good  the  same. 

That  no  one  of  the  above  conditions  or  provisions  contained  in 
this  bond,  shall  be  deemed  to  have  been  waived  by,  or  on  behalf 
of  the  company,  unless  the  waiver  be  in  writing,  over  the  signature 
of  its  president  and  secretary,  and  its  seal  thereto  affixed. 

In  witness   whereof,   the   said  (the   employee)    has   hereunto 

set  his  hand  and  seal,  and  the  said  company  has  caused  this  bond 
to  be  signed  by   its  president  and  its  secretary,   and   its 

corporate    seal    to   be   hereto    affixed    this  day   of  in    the 

year 

Signed,  sealed  and  delivered  by  the  said  employee  in  the  presence 
of 

(Seal)  Employee  .  President.  Secre- 

tary. 


SAMPLE  FORM  OF  GENERAL  SCHEDULE  BOND. 

LARCENY  AND  EMBEZZLEMENT. 

Whereas,  (hereinafter  called  the  "employer"),  has  em- 

ployed or  intends  to  employ  certain  persons  in  (which  per- 

sons are  hereinafter  called  the  "employees"),  and  are  named  on 
a  schedule  hereto  attached  and  made  a  part  hereof ;  and 

Whereas,  the  employer  has  delivered  to  the  Company,  a 

corporation  of  the  State  of  (hereinafter  called  the  "com- 

pany"), certain  statements  and  certificates  in  writing  relative  to 
the  duties,  responsibilities  and  accounts  of  the  employees,  the 
manner  of  conducting  the  business  of  the  employer,  and  the  man- 
ner of  checking  and  verifying  the  accounts  of  said  employees  and 
other  matters  connected  with  the  issuance  of  this  bond,  which 
together  with  any  other  statements,  certificates  and  agreements 
in  writing,  made,  or  to  be  made  by  the  employer  and  required 
by  or  lodged  with  the  company,  do  and  shall  constitute  the  basis 
of  this  contract,  or  any  continuation  thereof,  and  are  hereby  made 
a  part  hereof  the  same  as  if  herein  incorporated. 

189 


FIDELITY   INSURANCE   AND   CORPORATE    SURETYSHIP. 

And  it  is  hereby  declared,  that  if  the  employer  be  a  corporation, 
any  statements,  certificates  or  agreements  made  in  writing  by  the 
president,  secretary,  treasurer,  cashier,  or  any  other  officer  or 
director  of  the  employer,  shall  be  considered  the  statements,  cer- 
tificates or  agreements  of  the  employer  within  the  meaning  hereof. 

Now,    therefore,     in    consideration    of    the    sum    of  dollars 

($  )    paid  as   a  premium   for  the  period  from  to 

at  twelve  o'clock  noon,  and  upon  the  faith  of  the  aforesaid  state- 
ments, certificates  and  agreements  of  the  employer,  the  truth  of 
which  said  employer  does  hereby  warrant. 

It  is  hereby  agreed  and  declared,  that,  subject  to  the  war- 
ranties hereinbefore  mentioned,  and  the  provisions,  conditions  and 
agreements  herein  contained,  the  truth  of  which  warranties,  and  the 
fulfillment  of  which  provisions  and  agreements  shall  be  conditions 
precedent  to  the  right  of  the  employer  to  recover  under  this  bond, 
the  company  shall,  at  the  expiration  of  three  months  next  after 
satisfactory  proof  of  a  pecuniary  loss,  as  hereinafter  mentioned, 
reimbuse  the  employer  for  such  pecuniary  loss  as  the  employer 
shall  have  sustained  in  money,  securities  or  other  personal  property 
by  reason  of  any  act  of  larceny  or  embezzlement  of  any  of  the 
employees  named  upon  the  schedule  hereto  attached,  or  any  addi- 
tions thereto  made  as  hereinafter  provided,  in  the  performance  of 
the  duties  hereinbefore  referred  to,  as  the  same  have  been  or  may 
hereafter  be  stated  in  writing  by  the  employer  to  the  company,  and 
occurring  during  the  continuance  of  this  bond  and  discovered 
during  the  said  continuance  or  within  six  months  thereafter,  or, 
in  case  of  the  death,  resignation  or  removal  of  the  employee  prior 
to  the  expiration  of  this  bond,  within  six  months  ~  after  such, 
death,  resignation  or  removal. 

Provided,  that  the  liability  of  the  company  as  surety  for  the 
employees  to  the  employer  shall  not  exceed  the  sum  last  written 
opposite  their  names  on  said  schedule  or  additions  thereto,  whether 
the  loss  shall  occur  during  the  term  above  named,  or  during  any 
continuation  or  continuations  thereof,  or  partly  during  the  said 
term  and  partly  during  said  continuation  or  continuations. 

It  is  further  agreed  and  declared,  that  this  bond  may  be  con- 
tinued from  year  to  year,  at  the  option  of  the  employer,  at  the 
same  or  an  agreed  premium  rate,  so  long  as  the  company  shall 
consent  to  receive  the  same,  in  which  event  the  company  shall 
remain  liable  for  any  act  of  larceny  or  embezzlement  committed  by 
said  employees,  or  any  one  of  them,  named  upon  the  above  men- 
tioned schedule  or  any  additions  thereto  between  the  original  date 
of  this  bond  and  the  time  to  which  it  shall  have  been  continued. 

That  the  employer  shall  immediately  give  the  company  notice 
in  writing,  by  a  registered  letter,  addressed  to  the  president  of  the 
company,  ,  ,  of  the  discovery  of  any  act  which  may  be 

made  the  basis  of  any  claim  hereunder,  and  shall  file  with  the 
company  its  itemized  claim  hereunder,  at  employer's  cost  and  ex- 
pense, with  full  particulars  thereof,  duly  sworn  to,  within  three 
(3)  months  thereafter,  and  any  claim  which  shall  not  be  filed 
by  the  employer  with  the  company  within  six  (6)  months  after 
the  expiration  or  cancellation  of  this  bond,  or  within  six  (6)  months 
after  the  employee  therein  .concerned  shall  have  ceased  to  be  in  the 
employer's  service,  shall  not  be  payable  hereunder.  And  upon  the 
making  of  such  claims,  this  bond  shall  wholly  cease  and  determine 
as  regards  any  liability  for  any  act  or  acts  of  the  employee,  com- 
mitted subsequent  to  the  discovery  of  such  loss. 

190 


FIDELITY  INSURANCE  AND   COEPORATE   SURETYSHIP. 


That  the  employer  shall  at  once  notify  the  company  on  becom- 
ing aware  that  any  of  the  employees  is  engaging  in  speculation, 
gambling,  or  in  any  disreputable  or  unlawful  habits  or  pursuits. 

That  if  the  employer  shall  at  any  time  hold  concurrently  with 
this  bond,  or  represent  to  the  company  in  any  statement  or  declara- 
tion to  it,  that  said  employer  does  or  will  at  any  time  hold  concur- 
rently with  this  bond,  any  other  bond  or  guarantee  of  security  from 
or  on  behalf  of  the  employees,  or  any  of  them,  the  employer  shall  be 
entitled,  in  the  event  of  loss  as  hereinbefore  stated,  to  claim  hereunder 
only  such  proportion  of  the  loss  as  the  amount  covered  by  this  bond 
bears  to  the  whole  amunt  of  security  carried,  or  so  stated  as  carried  or 
to  be  carried  on  the  employees'  behalf,  whether  the  employer  shall 
be  able  to  reimburse  itself  from  such  other  bond  or  guarantee  so 
carried,  or  stated  to  be  carried  or  not,  or  whether  the  same  has 
been  allowed  to  lapse  or  not. 

That  if  the  company  shall  so  elect,  this  bond  may  be  cancelled 
at  any  time  with  respect  to  any  one  or  all  of  said  employees  by 
giving  one  month's  notice  to  the  employer.  At  the  expiration  of 
said  period  of  one  month,  the  oompany  will,  upon  demand,  refund 
the  premium  paid,  less  a  pro  rata  part  thereof,  for  the  time  this 
bond  shall  have  been  in  force,  remaining  liable  for  any  act  or  acts 
covered  by  this  bond,  which  may  have  been  committed  by  the  said 
employees  or  any  of  them  up  to  the  date  of  such  determination, 
and  discovered  and  notified  to  the  company  within  the  limit  of  time 
hereinbefore  provided  for. 

That  the  employer  shall,  if  so  required  by  the  company,  duly 
apply  for  a  warrant  for  the  arrest  of  any  of  the  employees  for 
any  act  or  acts  of  larceny  or  embezzlement,  which  is  the  basis  of 
any  claim  hereunder,  giving  all  the  aid  and  information  in  its  power 
(at  the  cost  and  expense  of  the  company)  to  bring  the  said  em- 
ployees to  justice  or  to  aid  the  company  to  sue  for  or  obtain 
reimbursement  from  the  employee  or  employees,  his  or  their  estate, 
or  any  other  person,  of  the  moneys  which  the  company  has  paid 
or  become  liable  to  pay  by  virtue  of  this  bond. 

That  if  the  employer  has  entrusted  or  shall  entrust  any  em- 
ployee hereby  bonded  with  money,  securities,  or  other  personal 
property,  after  having  discovered  any  act  of  dishonesty,  or  condones 
any  act  for  which  the  company  may  be  liable  hereunder,  or  makes 
any  settlement  with  the  said  employee  for  any  loss  hereunder, 
without  previous  notice  to  and  consent  of  the  company  thereto, 
this  bond  shall  be  null  and  void,  and  any  wilful  misstatement  or 
suppression  of  facts  in  any  claim  made  hereunder  renders  this  bond 
void  from  the  beginning. 

That  any  suits  at  law  or  proceedings  in  equity  brought  against 
this  bond,  to  recover  any  claim  hereunder,  must  be  instituted  and 
process  served  upon  the  company  within  twelve  calendar  months 
next  after  the  first  notice  of  said  claim  is  filed  with  the  company. 

That  the  company,  upon  the  execution  of  this  bond,  shall  not 
thereafter  be  responsible  to  the  employer  under  any  bond  previously 
issued  to  the  employer  on  behalf  of  said  employees,  and  upon  the 
issuance  of  any  bond  subsequent  hereto  upon  said  employees  in 
favor  of  said  employer,  all  responsibility  hereunder  shall  cease  and 
determine,  it  being  mutually  understood  that  it  is  the  intention 
of  this  provision  that  but  one  (the  last)  bond  shall  be  in  force 
at  one  time,  unless  otherwise  stipulated  between  the  employer  and 
the  company,  and  the  company  shall  in  no  event  be  liable  in  respect 
of  any  shortage  existing  at  the  commencement  of  this  bond,  or  for 
funds  or  property  used  to  make  good  the  same. 

191 


FIDELITY   INSURANCE   AND   CORPORATE    SURETYSHIP. 


That  the  employer  shall  have  the  right  at  any  time  during  the 
currency  of  this  bond,  on  giving  notice  to  the  company,  or  its  duly 
authorized  agent,  in  writing,  and  receiving  acknowledgment  thereof, 
to  make  such  interchanges  or  substitutions  among  any  of  the  em- 
ployees, as  may  be  found  necessary,  and  to  add  to  the  employees 
on  said  schedule,  on  payment  of  extra  premium  therefor ;  such  notices 
to  set  forth  the  names,  locations,  date  of  appointments,  and  amounts 
of  security  required  of  employees  so  substituted  or  added  to  said 
schedule. 

And  the  company  shall  not  be  liable  for  other  than  acts  of 
larceny  or  embezzlement  of  the  employees  named  in  said  schedule 
or  in  said  notices. 

That  if  the  employer  be  a  corporation,  the  acts  or  knowledge  of 
the  president,  treasurer,  secretary,  cashier,  or  any  other  officer  or 
director  of  the  corporation,  shall  be  the  acts  or  knowledge  of  the 
employer  within  the  meaning  hereof,  even  though  such  officer  or 
director  shall  be"  in  collusion  with  such  employee  or  employees  at 
the  time  of  said  act  or  knowledge. 

That  no  one  of  the  above  conditions  or  provisions  in  this  bond, 
shall  be  deemed  to  have  been  waived  by  or  on  behalf  of  the  com- 
pany, unless  the  waiver  be  in  writing,  over  the  signature  of  its 
president  and  secretary,  and  its  seal  thereto  affixed. 

In  witness  whereof  the  said  company  has  caused  this  bond  to 
be  signed  by  its  president  and  its  secretary,  and  its 

corporate  seal  to  be  hereunto  affixed  this  day  of  ,  A.  D. 

19       .  ,    President. 

,    Secretary. 
SCHEDULE    BOND    No. 

Schedule   of    employees    covered    by    attached    Schedule   Bond    No. 
,  in  favor  of  for  the  year  beginning  ,  19       ,  and 

ending  ,   19 


Indi- 

Re- 

vid- 

Date 

NAME 

LOCATION 

Am- 

Pre- 

Re- 

Date 

turn- 

ual 

of 

AND 

Add.    Ded. 

ount 

mium 

marks 

Ex- 

of 

ed 

Bond 

Add. 

POSITION 

Not.   Not. 

pense 

Ded. 

Pre- 

No. 

mium 

SAMPLE   FORM   OF   FRATERNAL   ORDER   BOND 
COVERING  POSITION. 

Agreement,   made  this  day  of          in  the  year  nineteen   hun- 

dred   and  ,    between    the  Company,    a    corporation    duly 

incorporated  under  the  laws  of  the  State  of  (hereinafter  called 

the    insurer),     and    the  of  ,    State    of  (hereinafter 

called  the  insured),  a  fraternal  beneficial  order. 

192 


FIDELITY   INSURANCE   AND    CORPORATE    SURETYSHIP. 


Witnesseth  :   Whereas,   the  said  has  certain   officers,  each  of 

whom  has  and  may  hereafter  have  from  time  to  time  in  his  hands 
and  possession  money,  funds,  securities  and  other  personal  property 
belonging  to  the  insured,  collected  and  received  by  such  officers, 
severally,  from  members  of  the  insured  to  be  held  and  accounted 
for  by  each  of  them  in  accordance  with  the  Constitution  and  By- 
Laws  of  the  insured. 

Now,  therefore,  in  consideration  of  an  annual  premium,  computed 
at  an  agreed  rate,  the  insurer  hereby  covenants  and  agrees  to  and 
with  the  insured  that  it  will,  within  ninety  days  next  after  claim 
and  proof  of  loss  verified  by  affidavit,  as  hereinafter  provided, 
shall  have  been  furnished  the  insurer  at  its  Home  Office  in  the 
city  of  ,  make  good  and  reimburse  to  the  insured  any  and  all 

pecuniary  loss  sustained  by  the  insured  by  reason  of  the  fraud  or 
dishonesty  of  the  officers  filling  the  positions  mentioned  in  the 
schedule  hereunto  annexed  (which  has  been  filed  with  the  insurer 
by  the  insured,  and  upon  which  the  number  and  positions  of  said 
officers  appear),  or  which  may  be  added  thereto  as  hereinafter  pro- 
vided in  connection  with  their  duties  as  such  officers,  as  the  case 
may  be,  and  which  shall  have  been  committed  at  any  time  after 
the  day  of  ,  19  as  to  the  of  the  named 

in  the  list  attached  hereto,  and  marked  "  Schedule,"  and  as  to 
any  new  or  additional  official  position  at  any  time  after  such  official 
position  has  been  added  to  said  schedule  by  the  insurer,  and  prior 
to  the  day  of  19  ,  as  to  all  of  said  official  positions 

and  which  said  loss  shall  be  discovered  during  such  term,  or  within 
six  months  thereafter,  or  within  six  months  from  the  death,  dis- 
missal or  retirement  of  such  officers  from  such  positions,  within  the 
period  of  this  bond,  whichever  shall  first  happen. 

Provided,  however,  that  the  liability  of  the  insurer  on  account 
of  any  official  position  shall  in  no  case  exceed  the  amount  specified 
in  said  schedule  for  said  position,  and  therein  set  opposite  the 
number  and  official  position. 

Provided,  also,  that  on  the  discovery  of  any  such  fraud  or  dis- 
honesty as  aforesaid  on  the  part  of  any  said  officers  whose  positions 
are  set  forth  in  said  schedule,  the  insured  shall  give  notice  thereof 
to  the  insurer  within  ten  days  after  such  discovery,  together  with 
the  name,  official  position  and  address  of  the  official  who  has  com- 
mitted the  same,  and  full  particulars  of  any  claim  made  here- 
under  shall  be  given  in  writing  addressed  to  the  insurer,  at  its 
Home  Office  in  the  city  of  ,  within  ninety  days  after  such 

discovery,  as  aforesaid.  And  failure  to  give  such  ten  days'  notice, 
or  to  furnish  sucfi  particulars  within  said  ninety  days,  shall  relieve 
the  insurer  from  all  liability  hereunder  on  account  of  the  officer 
causing  such  loss. 

Provided,  First.  That  the  insurer  shall  be  entitled  to  call  for 
such  reasonable  particulars  and  proofs  of  loss  as  may  be  required 
by  the  insurer,  and  to  have  the  said  particulars,  or  any  of  them, 
verified  by  affidavit. 

Second.      That  the   insurer  shall   not  be   liable  for  any   loss  occa- 
sioned   by    any    officer    filling    a    position    unless    proof    of    such    loss 
be  filed   with   the   insurer,    at   its   Home   Office  in   the  city  of 
within    nine    months    from    the    expiration    of    this    agreement. 

Third.  That  should  any  of  said  officers  filling  a  position  become 
guilty  of  an  offense  .covered  by  this  agreement,  the  insured  will 
immediately,  on  being  requested  by  the  insurer  to  do  so,  lay  infor- 
mation before  a  proper  officer,  covering  the  facts,  and  verify  the 
same  as  required  by  law,  and  furnish  the  insurer  every  aid  and 
assistance,  not  pecuniary,  capable  of  being  rendered  by  the  insured, 

193 


FIDELITY   INSURANCE   AND   CORPORATE    SURETYSHIP. 


its  agents  and  officers,  which  will  aid  in  bringing  the  party 
promptly  to  justice,  and  such  action,  when  required  of  the  insured, 
shall  be  a  condition  precedent  to  recovery  under  this  agreement. 

Fourth.  That  this  agreement  will  become  void  as  to  any  claim 
for  which  the  insurer  is  liable  hereunder  if  the  insured  shall  fail 
to  notify  the  insurer  of  the  occurrence  of  any  act  for  which  claim 
shall  be  made  within  ten  days  after  the  discovery  of  same,  as 
hereinbefore  provided. 

Fifth.  That  this  agreement  may  be  renewed  and  continued  in 
full  force  from  year  to  year  by  continuation  certificate  signed  by 
the  insurer. 

Sixth.  The  insurer,  upon  giving  thirty  days'  notice  in  writing 
to  the  insured,  may  at  any  time  cancel  this  agreement  and  terminate 
its  responsibility  thereunder  in  respect  of  the  acts  of  any  official 
done  after  said  termination.  If  the  insurer  subsequently  pay  any 
loss  thereunder  in  respect  of  any  such  official,  the  amount  of 
premium  paid  as  to  such  official  shall  be  deemed  to  have  been 
fully  earned  and  to  belong  to  the  insurer.  Otherwise  the  insurer 
shall,  upon  demand,  return  to  the  insured  a  pro  rata  portion  of 
the  premium. 

In  witness  whereof  the  insurer  has  caused  this  agreement  to  be 
sealed  with  its  common  and  corporate  seal,  duly  attested  by  its 

president    and    its  secretary,    this  day    of 

19 

Company, 

,  President. 
,   Secretary. 


SAMPLE    FORM    OF    INDIVIDUAL    FIDELITY 
BANK  BOND. 

Whereas,  ,    herein    called    the    "  employee,"    has    been    ap- 

pointed to  the  position  of  in  the  service  of  ,  a  corpora- 

tion   of    the    State    of  ,    hereinafter    called    the    "employer;" 

and  has  been  required  to  furnish  bond  for  his  honesty  in  the 
performance  of  his  duties  in  said  position,  and 

Whereas,    the    employer    has    delivered    to    the  Company,    a 

corporation    of    the    State    of  ( hereinafter    called    the    "  com- 

pany"), certain  statements  and  certificates  in  writing  relative  to 
the  duties,  responsibilities  and  accounts  of  the  employee,  the 
manner  of  conducting  the  business  of  the  employer,  and  the  man- 
ner of  checking  and  verifying  the  accounts  of  said  employee  and 
other  matters  connected  with  the  issuance  of  this  bond,  which, 
together  with  any  other  statements,  certificates  and  agreements 
in  writing,  made,  or  to  be  made  by  the  employer,  and  required 
by  or  lodged  with  the  .company,  do  and  shall,  constitute  the  basis 
of  this  contract,  or  any  continuation  thereof,  and  are  hereby  made 
a  part  hereof  the  same  as  if  herein  incorporated. 

And  it  is  hereby  declared,  that  any  statements,  certificates  or 
agreements  made  in  writing  by  the  president,  secretary,  treasurer, 
cashier,  or  any  other  officer  or  director  of  the  employer,  shall  be 
considered  the  statements,  certificates  or  agreements  of  the  em- 
ployer within  the  meaning  hereof. 

Now,     therefore,     in     consideration     of     the     sum     of  dollars 

($  )    paid   as   a   premium   for  the   period   from  to 

at  twelve  o'clock  noon,   and  upon  the  faith  of  the  aforesaid  state- 

194 


FIDELITY  INSURANCE  AND   CORPORATE   SURETYSHIP. 


ments,  certificates  and  agreements  of  the  employer,  the  truth  of 
which  said  employer  does  hereby  warrant. 

It  is  hereby  agreed  and  declared,  that,  subject  to  the  war- 
ranties hereinbefore  mentioned,  and  ttfe  provisions,  conditions  and 
agreements  herein  contained,  the  truth  of  which  warranties,  and  the 
fulfillment  of  which  provisions  and  agreements  shall  be  conditions 
precedent  to  the  right  of  the  employer  to  recover  under  this  bond, 
the  company  shall,  at  the  expiration  of  three  months  next  after 
satisfactory  proof  of  a  pecuniary  loss,  as  hereinafter  mentioned, 
reimburse  the  employer  to  the  extent  of  the  sum  of  dollars 

($  ),  and  no  further,  for  such  pecuniary  loss  the  employer 

shall  have  sustained  by  any  act  of  personal  dishonesty  on  the 
part  of  the  employee  in  the  performance  of  the  duties  of  the 
office  or  position  in  the  service  of  the  employer  hereinbefore  re- 
ferred to  as  the  same  have  been  or  may  hereafter  be  stated  in 
writing  by  the  employer  to  the  company,  and  occurring  during 
the  continuance  of  this  bond,  and  discovered  during  said  con- 
tinuance or  within  six  months  after  the  death,  resignation  or 
removal  of  the  employee  from  the  service  of  the  employer,  when 
the  same  occurs  prior  to  the  expiration  of  this  bond. 

It  is  further  agreed  and  declared,  that  this  bond  may  be  con- 
tinued from  year  to  year,  at  the  option  of  the  employer,  at  the 
same  or  an  agreed  premium  rate,  so  long  as  the  company  shall 
consent  to  receive  the  same,  in  which  event  the  company  shall 
remain  liable  for  any  act  of  personal  dishonesty  commmitted  by 
the  employee  between  the  original  date  of  this  bond  and  the  time 
to  which  it  shall  have  been  continued.  Provided,  that  the  liability 
of  the  company  as  surety  for  the  employee  to  the  employer  shall 
not  exceed  the  amount  above  written,  whether  the  loss  shall  occur 
during  the  term  above  named,  or  during  any  continuation  or  con- 
tinuations thereof,  or  partly  during  the  said  term  and  partly 
during  said  continuation  or  continuations. 

That  the  employer  shall  immediately  give  the  company  notice 
in  writing,  by  a  registered  letter,  addressed  to  the  president  of  the 
company,  ,  ,  of  the  discovery  of  any  act  which  may  be 

made  the  basis  of  any  claim  hereunder,  and  shall  file  with  the 
company  its  itemized  claim  hereunder  at  its  own  cost  and  ex- 
pense, with  full  particulars  thereof,  duly  sworn  to,  within  three 
(3)  months  thereafter.  And  any  claim  which  shall  not  be  filed 
by  the  employer  with  the  company  within  six  (6)  months  after 
the  expiration  or  cancellation  of  this  bond,  or  within  six  (6)  months 
after  the  employee  shall  have  ceased  to  be  in  the  employer's  ser- 
vice, shall  not  be  payable  hereunder.  And  upon  the  making  of 
such  claim,  this  bond  shall  wholly  cease  and  determine  as  regards 
any  liability  for  any  act  or  acts  of  the  employee,  committed  subse- 
quent to  the  discovery  of  such  loss,  and  this  bond  shall  be  surrendered 
to  the  company  on  payment  of  such  claim. 

That  the  employer  shall  at  once  notify  the  company  on  becom- 
ing aware  that  the  employee  is  engaging  in  speculation,  gambling, 
or  in  any  disreputable  or  unlawful  habits  or  pursuits. 

That  if  the  employer  shall  at  any  time  hold  concurrently  with 
this  bond,  or  represent  to  the  company  in  any  statement  or  declara- 
tion to  it,  that  he  does  or  will  at  any  time  hold  concurrently  with 
this  bond,  any  other  bond  or  guarantee  of  security  from  or  en  behalf 
of  the  employee,  the  employer  shall  be  entitled,  in  the  event  of 
loss  as  hereinbefore  stated,  to  claim  hereunder  only  such  pro- 
portion of  the  loss  as  the  amount  covered  by  this  bond  bears  to 
the  whole  amount  of  security  carried,  or  so  stated  as  carried  or 
to  be  carried  on  the  employee's  behalf,  whether  the  employer  shall 

195 


FIDELITY   INSURANCE  AND   CORPORATE   SURETYSHIP. 


be  able  to  reimburse  itself  from  such  other  bond  or  guarantee  so 
carried,  or  stated  to  be  carried  or  not,  or  whether  the  same  has 
been  allowed  to  lapse  or  not. 

That  if  the  company  shall  so  elect,  this  bond  may  be  cancelled 
at  any  time  by  giving  one  month's  notice  to  the  employer,  and 
refunding  the  premium  paid,  less  a  pro  rata  part  thereof,  for  the 
time  this  bond  shall  have  been  in  force,  remaining  liable  for  any 
act  or  acts  covered  by  this  bond,  which  may  have  been  committed 
by  the  said  employee,  up  to  the  date  of  such  determination,  and 
discovered  and  notified  to  the  company  within  the  limit  of  time 
hereinbefore  provided  for. 

That  the  employer  shall,  if  so  required  by  the  company,  duly 
apply  for  a  warrant  for  the  arrest  of  the  employee  for  any  crim- 
inal act  which  is  the  basis  of  any  claim  hereunder,  giving  all  the 
aid  and  information  in  its  power  (at  the  cost  and  expense  of  the 
company)  to  bring  the  said  employee  to  justice  or  to  aid  the  com- 
pany to  sue  for  or  obtain  reimbursement  from  the  employee,  his 
estate,  or  a  third  person,  of  the  moneys  which  the  company  has 
paid  or  become  liable  to  pay  by  virtue  of  this  bond. 

That  if  the  employer  shall  entrust  the  employee  with  money, 
securities,  or  other  personal  property,  after  having  discovered  any 
act  of  dishonesty  or  shall  condone  any  act  for  which  the  company 
may  be  liable  hereunder,  or  shall  make  any  settlement  with  the 
employee  for  any  loss  hereunder,  without  previous  notice  to  and 
consent  of  the  company  thereto,  this  bond  shall  be  null  and  void, 
and  any  wilful  misstatement  or  suppression  of  facts  in  any  claim 
made  hereunder  renders  this  bond  void  from  the  beginning. 

That  any  suits  at  law  or  proceedings  in  equity  brought  against 
this  bond,  to  recover  any  claim  hereunder,  must  be  instituted  and 
process  served  upon  the  company  within  twelve  calendar  months 
next  after  the  first  notice  of  said  claim  is  filed  with  the  company. 

That  the  company,  upon  the  execution  of  this  bond,  shall  not 
thereafter  be  responsible  to  the  employer  under  any  bond  previously 
issued  to  the  employer  on  behalf  of  said  employee,  and  upon  the 
issuance  of  any  bond  subsequent  hereto  upon  said  employee  in 
favor  of  said  employer,  all  responsibility  hereunder  shall  cease  and 
determine,  it  being  mutually  understood  that  it  is  the  intention 
of  this  provision  that  but  one  (the  last)  bond  shall  be  in  force 
at  one  time,  unless  otherwise  stipulated  between  the  employer  and 
the  company,  and  the  company  shall  in  no  event  be  liable  in  respect 
of  any  shortage  existing  at  the  commencement  of  this  bond  or  for 
funds  or  property  used  to  make  good  the  same. 

That  the  acts  or  knowledge  of  the  president,  treasurer,  secretary, 
cashier,  or  any  other  officer  or  director  of  the  corporation,  shall  be 
the  acts  or  knowledge  of  the  employer  within  the  meaning  hereof, 
even  though  such  officer  or  director  shall  be  in  collusion  with  the 
employee  at  the  time  of  such  act  or  knowledge. 

That  no  one  of  the  above  conditions  or  provisions  contained  in 
this  bond  shall  be  deemed  to  have  been  waived  by  or  on  behalf 
of  the  company,  unless  the  waiver  be  in  writing,  over  the  signature 
of  its  president  and  secretary,  and  its  seal  thereto  affixed. 

In  witness  whereof,  the  said  (the  employee)  has  hereunto 

set  his  hand  and  seal,  and  the  said  company  has  caused  this  bond 
to  be  signed  by  its  president  and  its  secretary,  and  its 

corporate  seal  to  be  hereto  affixed  this  day  of  in  the 

year  .  (Signature.) 

Signed,  sealed  and  delivered  by  the  said  employee  in  the  presence 
°*  •  (Signature.) 

196 


FIDELITY  INSURANCE  AND   CORPORATE   SURETYSHIP. 

SAMPLE  FORM  OF  BANK  FIDELITY  SCHEDULE 
BOND. 

Whereas,  (hereinafter    called    the    "employer"),    has    em- 

ployed   or    intends    to    employ    certain    persons    in    the    capacity    of 
,    (which    persons   are   hereinafter    called    the    "  employees  "), 
and    are    named    on    a    schedule    hereto    attached    and    made    a    part 
hereof ;   and 

Whereas,    the    employer    has    delivered    to    the  Company,    a 

corporation    of    the    State    of  ( hereinafter   called    the    "  com- 

pany"), certain  statements  and  certificates  in  writing  relative  to 
the  duties,  responsibilities  and  accounts  of  the  employees,  the 
manner  of  conducting  the  business  of  employer,  and  the  man- 
ner of  checking  and  verifying  the  accounts  of  said  employees  and 
other  matters  connected  with  the  issuance  of  this  bond,  which, 
together  with  any  other  statements,  certificates  and  agreements 
in  writing,  made,  or  to  be  made  by  the  employer,  and  required 
by  or  lodged  with  the  company,  do  and  shall,  constitute  the  basis 
of  this  contract,  or  any  continuation  thereof,  and  are  hereby  made 
a  part  hereof  the  same  as  if  herein  incorporated. 

And  it  is  hereby  declared,  that  any  statements,  certificates  or 
agreements  made  in  writing  by  the  president,  secretary,  treasurer, 
cashier,  or  any  other  officer  or  director  of  the  employer,  shall  be 
considered  the  statements,  certificates  or  agreements  of  the  em- 
ployer within  the  meaning  hereof. 

Now,     therefore,     in    consideration    of    the    sum    of  dollars 

($  )    paid   as   a  premium  for  the  period  from  to 

at  twelve  o'clock  noon,  and  upon  the  faith  of  the  aforesaid  state- 
ments, certificates  and  agreements  of  the  employer,  the  truth  of 
which  said  employer  does  hereby  warrant. 

It  is  hereby  agreed  and  declared,  that,  subject  to  the  war- 
ranties hereinbefore  mentioned,  and  the  provisions,  conditions  and 
agreements  herein  contained,  the  truth  of  which  warranties,  and  the 
fulfillment  of  which  provisions  and  agreements  shall  be  conditions 
precedent  to  the  right  of  the  employer  to  recover  under  this  bond, 
the  company  shall,  at  the  expiration  of  three  months  next  after 
satisfactory  proof  of  a  pecuniary  loss,  as  hereinafter  mentioned, 
reimburse  the  employer  for  such  pecuniary  loss  as  the  employer 
shall  have  sustained  in  money,  securities  or  other  personal  property 
by  reason  of  the  personal  dishonesty  of  any  of  the  employees 
named  upon  the  schedule  hereto  attached  or  any  additions  thereto 
made  as  hereinafter  provided  in  the  performance  of  the  duties 
hereinbefore  referred  to,  as  the  same  have  been  or  may  here- 
after be  stated  in  writing  by  the  employer  to  the  company,  and 
occurring  during  the  continuance  of  this  bond  and  discovered 
during  the  said  continuance  or  within  six  months  thereafter,  or, 
in  case  of  the  death,  resignation  or  removal  of  the  employee  prior 
to  the  expiration  of  this  bond,  within  six  months  after  such 
death,  resignation  or  removal. 

Provided,  that  the  liability  of  the  company  as  surety  for  the 
employees  to  the  employer  shall  not  exceed  the  sum  last  written 
opposite  their  names  on  said  schedule  or  additions  thereto,  whether 
the  loss  shall  occur  during  the  term  above  named,  or  during  any 
continuation  or  continuations  thereof,  or  partly  during  the  said 
term  and  partly  during  said  continuation  or  continuations. 

It  is  further  agreed  and  declared,  that  this  bond  may  be  con- 
tinued from  year  to  year,  at  the  option  of  the  employer,  at  the 
same  or  an  agreed  premium  rate,  so  long  as  the  company  shall 

197 


FIDELITY   INSURANCE  AND   CORPORATE   SURETYSHIP. 

consent  to  receive  the  same,  in  which  event  the  company  shall 
remain  liable  for  any  act  of  personal  dishonesty  commmitted  by 
said  employees  or  any  one  of  them  named  upon  the  above  mentioned 
schedule  or  any  additions  thereto  between  the  original  date  of  this 
bond  and  the  time  to  which  it  shall  have  been  continued. 

That  the  employer  shall  immediately  give  the  company  notice 
in  writing,  by  a  registered  letter,  addressed  to  the  president  of  the 
company,  ,  ,  of  the  discovery  of  any  act  which  may  be 

made  the  basis  of  any  claim  hereunder,  and  shall  file  with  the 
company  its  itemized  claim  hereunder,  at  employer's  cost  and  ex- 
pense, with  full  particulars  thereof,  duly  sworn  to  within  three 
(3)  months  thereafter.  And  any  claim  which  shall  not  be  filed 
by  the  employer  with  the  company  within  six  (6)  months  after 
the  expiration  or  cancellation  of  this  bond,  or  within  six  (6)  months 
after  the  employee  therein  concerned  shall  have  ceased  to  be  in  the 
employer's  service,  shall  not  be  payable  hereunder.  And  upon  the 
making  of  such  claims,  this  bond  shall  wholly  cease  and  determine 
as  regards  any  liability  for  any  act  or  acts  of  the  employee, 
committed  subsequent  to  the  discovery  of  such  loss,  and  this  bond 
shall  be  surrendered  to  the  company  on  payment  of  such  claim. 

That  the  employer  shall  at  once  notify  the  company  on  becom- 
ing aware  that  any  of  the  employees  is  engaging  in  speculation, 
gambling,  or  in  any  disreputable  or  unlawful  habits  or  pursuits. 

That  if  the  employer  shall  at  any  time  hold  concurrently  with 
this  bond,  or  represent  to  the  company  in  any  statement  or  declaration 
to  it,  that  said  employer  does  or  will  at  any  time  hold  concurrently 
with  this  bond,  any  other  bond  or  guarantee  of  security  from  or  on 
behalf  of  the  employees,  or  any  of  them,  the  employer  shall  be  entitled, 
in  the  event  of  loss  as  hereinbefore  stated,  to  claim  hereunder  only 
such  proportion  of  the  loss  as  the  amount  covered  by  this  bond  bears 
to  the  whole  amount  of  security  carried,  or  so  stated  as  carried  or 
to  be  carried  on  the  employees'  behalf,  whether  the  employer  shall 
be  able  to  reimburse  itself  from  such  other  bond  or  guarantee  so 
carried,  or  so  stated  to  be  carried  or  not,  or  whether  the  same  has 
been  allowed  to  lapse  or  not. 

That  if  the  company  shall  so  elect,  this  bond  may  be  cancelled 
at  any  time  with  respect  to  any  one  or  all  of  said  employees  by 
giving  one  month's  notice  to  the  employer  and  refunding  the  prem- 
ium paid,  less  a  pro  rata  part  thereof,  for  the  time  this  bond  shall 
have  been  in  force,  remaining  liable  for  any  act  or  acts  covered 
by  this  bond,  which  may  have  been  committed  by  the  said  em- 
ployees or  any  of  them  up  to  the  date  of  such  determination,  and 
discovered  and  notified  to  the  company  within  the  limit  of  time 
hereinbefore  provided  for. 

That  the  employer  shall,  if  so  required  by  the  company,  duly 
apply  for  a  warrant  for  the  arrest  of  any  of  the  employees  for 
any  criminal  act,  which  is  the  basis  of  any  claim  hereunder, 
giving  all  the  aid  and  information  in  its  power  (at  the  cost  and 
expense  of  the  company)  to  bring  the  said  employee,  to  justice  or 
to  aid  the  company  to  sue  for  or  obtain  reimbursement  from  the 
said  employee,  or  employees,  his  or  their  estate,  or  any  other  per- 
son, of  the  moneys  which  the  company  has  paid  or  become  liable 
to  pay,  by  virtue  of  this  bond. 

That  if  the  employer  has  entrusted  or  shall  entrust  any  em- 
ployee hereby  bonded  with  money,  securities,  or  other  personal 
property,  after  having  discovered  any  act  of  dishonesty,  or  condones 
any  act  for  which  the  company  may  be  liable  hereunder,  or  makes 
any  settlement  with  the  said  employee  for  any  loss  hereunder, 

198 


FIDELITY   INSURANCE   AND    CORPORATE    SURETYSHIP. 

without  previous  notice  to  and  consent  of  the  company  thereto, 
this  bond  shall  be  null  and  void,  and  any  wilful  misstatement  or 
suppression  of  facts  in  any  claim  made  hereunder  renders  this  bond 
void  from  the  beginning. 

That  any  suits  at  law  or  proceedings  in  equity  brought  against 
this  bond,  to  recover  any  claim  hereunder,  must  be  instituted  and 
process  served  upon  the  company  within  twelve  calendar  months 
next  after  the  first  notice  of  said  claim  is  filed  with  the  company. 

That  the  company,  upon  the  execution  of  this  bond,  shall  not 
thereafter  be  responsible  to  the  employer  under  any  bond  previously 
issued  to  the  employer  on  behalf  of  said  employees,  and  upon  the 
issuance  of  any  bond  subsequent  hereto  upon  said  employees  in 
favor  of  said  employer,  all  responsibility  hereunder  shall  cease  and 
determine,  it  being  mutually  understood  that  it  is  the  intention 
of  this  provision  that  but  one  (the  last)  bond  shall  be  in  force 
at  one  time,  unless  otherwise  stipulated  between  the  employer  and 
the  company,  and  the  company  shall  in  no  event  be  liable  in  respect 
of  any  shortage  existing  at  the  commencement  of  this  bond  or  for 
funds  or  property  used  to  make  good  the  same. 

That  the  employer  shall  have  the  right  at  any  time  during  the 
currency  of  this  bond,  on  giving  notice  to  the  company,  or  its  duly 
authorized  agent,  in  writing,  and  receiving  acknowledgment  thereof, 
to  make  such  interchanges  or  substitutions  among  any  of  the  em- 
ployees, as  may  be  found  necessary,  and  to  add  to  the  employees 
on  said  schedule,  on  payment  of  extra  premium  therefor ;  such  notices 
to  set  forth  the  names,  locations,  date  of  appointments,  and  amounts 
of  security  required  of  employees  so  substituted  or  added  to  said 
schedule. 

And  the  company  shall  not  be  liable  for  other  than  acts  of 
personal  dishonesty  of  the  employees  named  in  said  schedule  or 
in  said  notices. 

That  the  acts  or  knowledge  of  the  president,  treasurer,  secretary, 
cashier,  or  any  other  officer  or  director  of  the  corporation,  shall  be 
the  acts  or  knowledge  of  the  employer  within  the  meaning  hereof, 
even  though  such  officer  or  director  shall  be  in  collusion  with  such 
employee  or  employees  at  the  time  of  said  act  or  knowledge. 

That  no  one  of  the  above  conditions  or  provisions  in  this  bond 
shall  be  deemed  to  have  been  waived  by,  or  on  behalf  of  the  com- 
pany, unless  the  waiver  be  in  writing,  over  the  signature  of  its 
president  and  secretary,  and  its  seal  thereto  affixed. 

In  witness  whereof  the  said  company  has  caused  this  bond  to 
be  signed  by  its  president  and  its  secretary,  and  its 

corporate  seal  to  be  hereunto  affixed  this  day  of  ,  A.  D. 

(Signature.) 
(Schedule  of  employees,  with  amounts  bonded  attached.) 


THE     AMERICAN     BANKERS'     ASSOCIATION 
STANDARD  FORM  BANK  FIDELITY  BOND. 

(Copyrighted  1899.) 

This  bond,  witnesseth :  Whereas,  (hereinafter  designated  the 

"  employer ")  has  appointed  to  positions  in  the  service  of  the 
employer,  that  certain  person  or  those  certain  persons  (hereinafter 
designated  "  employees  ")  whose  name  or  names  appear  in  the 

199 


FIDELITY   INSURANCE   AND    CORPORATE    SURETYSHIP. 


schedule  hereto  attached,  which  is  hereby  referred  to  and  made  a 
part  of  this  bond,  in  respect  of  whom  the  employer  requires  In- 
demnity of  the  kind  and  nature  hereinafter  provided ;  and 

Whereas,  the  employer  may  hereafter  require  like  indemnity  in 
respect  of  other  persons  (hereinafter  included  in  the  designation 
"employees")  in  the  employer's  service: 

Now  therefore,  for  and  in  consideration  of  a  stipulated  premium, 
paid  or  agreed  to  be  paid  by  the  employer,  the  company,  a 

corporation  existing  under  and  by  virtue  of  the  laws  of  the  State 
of  (hereinafter  designated  the  "company")  hereby  covenants 

and  agrees  to  and  with  the  employer  that  it  will,  at  the  expiration 
of  three  months  after  proofs  of  loss  shall  have  been  furnished  to 
the  company,  pay  to  the  employer  the  amount  of  any  loss  of 
damage  that  shall  happen  to  the  employer  in  respect  of  any  funds, 
property  or  estate  belonging  to  or  in  the  custody  of  the  employer, 
through  the  dishonesty  of  any  of  the  employees  (or  through  any  act 
of  omission  or  commission  of  any  of  the  employees),  done  or  omitted 
in  bad  faith,  and  not  through  mere  negligence,  incompetency  or  any 
error  of  judgment  and  whether  such  dishonesty  or  such  act  of 
omission  or  commission  occurs  in  the  performance  of  any  duty  or 
trust  specially  assigned  to  such  employee  or  occurs  otherwise  ;  sub- 
ject, however,  to  the  following  provisions  and  agreements : 

1.  There  shall  be  no   liability  hereunder  on  the  part  of  the  com- 
pany unless  the  a.ct  or  default  through  which  such  loss  may  happen 
shall,  in  respect  of  the  employees  originally  named  in  the  schedule, 
occur  on  or   after   the  day  of  A.   D.   19        ,   and  shall   in 
respect  of   any  employee  hereafter  added  to  the   schedule  by  notice 
and  acceptance  as  hereinafter  provided,  occur  on  or  after  the  date 
upon  which  his  or  her  name  shall  have  been  added  to  the  schedule, 
and    shall,    in    respect   of    all    employees,    occur   prior   to   or   on    the 

day  of  A.  D.   19       ,  or  prior  to  or  on  any  ether  date 

to   which   this  bond   may   be   continued. 

2.  There  shall  be  no  liability  hereunder  on  the  part  of  the  com- 
pany   unless   such   loss   or   damage   shall   be   discovered   during   such 
designated  term,  or  within  one  year  after  the  final  expiry  (as  deter- 
mined by  the  term  herein   specified   and  any  and  all  continuances) 
of  this  bond,  and  within  one  year  after  the  cancellation  or  termina- 
tion   of   this   bond,    or   of   any   engagement   hereunder   in   respect   of 
the  employee  causing  a  loss. 

3.  The   company's   liability   on   account  of   any   employee   shall   in 
no    case   exceed   the    amount    set   opposite    his   or   her   name    in   the 
schedule  hereto  attached,   as  such  name  and  amount  now  appear  or 
as  they   may   be  hereafter  added   to   or  changed   upon   the   schedule 
in  accordance  with  the  provisions  therefor  hereinafter  set  forth. 

4.  If  the  employer  requires  indemnity  in  respect  of  any  employee 
other  than   those  named   in   the  schedule   hereto   attached,   or   if   the 
employer    requires    indemnity    in    respect    of    any    employee    in    the 
schedule    named    in     an     amount    larger    or    smaller    than    therein 
specified,    the    employer   shall    give    to    the    company    written    notice 
of    the    name    of    such    employee    and    the    amount    for    which    the 
employer   may    desire    the    company    to    become   bound    in    respect   of 
such   employee,    and   thereupon   the   company,    if   it  elects   to   become 
bond   for  such   employee   in   the   required   amount,   shall   execute   and 
deliver  to  the  employer  its  written  acceptance,  specifying  the  amount 
for   which    and    the    date   from   which    the    company    shall    be    bound 
in    respect    of    such    newly    designated    employee,    and    specifying    in 
respect  of   a   change   in   the   amount  of   indemnity,   the   new    amount 
and  the  date  from  which  it  shall  be  effective,   it  being  agreed  and 
understood    that    thereby    such    name    or    names    and    specifications 

200 


FIDELITY    INSURANCE   AND   CORPORATE    SURETYSHIP. 


shall  be  deemed  to  be  added  to  the  schedule  hereto  attached,  and 
the  obligations  of  the  employer  and  the  company  in  respect  thereof 
shall  be  subject  to  all  the  provisions  herein  contained  and  in  every 
way  as  though  such  name  and  specifications  had  formed  part  of  the 
original  schedule. 

5.  Whatever  number  of  engagements  may  be  made   by  the  com- 
pany with  the  employer  in  respect  of  any  employee,  either  by  way 
of  separate  bonds,  or  by  acceptances  as  herein  provided,  or  by  con- 
tinuances as  herein  provided,  the  aggregate  liability  of  the  company 
for    all    losses   under   all    its    engagements   shall   not   exceed   a   sum 
equal  to  the  amount  of  the  largest  of  the  engagements  under  which 
such   losses   occurred,    nor   shall   the   company   be    liable   under   any 
specific  engagement  for  any  loss  occurring  under  any  other  engage- 
ment. 

6.  The   company   shall   in   no   event   be  liable  for  any  matter  or 
thing  done  by  any  employee   after  definitely  leaving  the  service  of 
the  employer,  nor  for  any  act  or  default  of  an  employee  occurring 
after  a   loss    in    respect   of   such   employee   shall   have   come   to   the 
knowledge  of   the  employer. 

7.  The    company    shall    be    primarily    responsible   to   the    limit   of 
its  bond  in  respect  of  any  employee,  for  any  loss  sustained  by  the 
employer  through  the  act  or  default  of  such  employee  without  regard 
to   any  other   security  or  indemnity   held   by  the  employer.      If   the 
company   shall    pay   the   entire    loss   of   the   employer    in    respect  of 
any  employee,  it  shall  be  entitled  to   receive  an  assignment  of  any 
other    security   or    indemnity   which   may   be   held    by   the    employer, 
with  authority  to  seek  contribution  therefrom.     If  the  company  shall 
pay  only  a  portion  of  the  loss  of  the  employer,  it  shall  be  entitled 
to    receive    an    assignment    of    only    such    securities    and    indemnity 
as  may   remain  after  the  employer  has  been  fully  indemnified,  with 
authority   to   seek   contribution   therefrom.      Nothing   herein   shall   be 
construed   to   authorize   the  company   to   defer   payment  of   any   loss 
to    the    limit    of    its    bond    pending    realization    upon    other    security 
or    indemnity    or   pending   any   adjustment   of   rights   respecting   the 
same. 

8.  The    employer    may,    at    any    time,    transfer    any    and    every 
employee    for   whom    the   company    is,    or   may    become,    during    the 
continuance    of    this    bond,    bound    hereunder,    from   one   position    to 
another,    and   shift   any   employee   about   at  pleasure  without   notice 
to   the   company,   and   the   company   shall  be   and   remains   liable  to 
the    employer    for    any    loss    hereunder    as    fully    and    to    the    same 
extent  as   if  no  transfers  had  been   made. 

9.  The    company    shall    not    be    relieved    from    liability    by    reason 
of    any    employee    being    required    to    perform    varied    and    different 
and    inconsistent   duties    permanently   or   temporarily    without   notice 
to   the   company,    and   whether  or   not  his   or   her  compensation   be 
at  any  time  increased  or  diminished. 

10.  The    company    shall    not    be    liable    to    the    employer    for    any 
failure,    neglect    or    refusal    of    any    employee    to    repay    to    the    em- 
ployer   any    debt    for    money    legitimately    borrowed. 

11.  The  employer  warrants  that  the  following  statements  are  true : 

(a)  Each    employee    named    in    the    schedule    has,    while    in    the 
service    of    the    employer,    discharged    his    or    her    respective    duties 
in    good    faith    (mere    negligence    or    error    of    judgment    not    being 
considered)  and  with  honesty,  so  far  as  the  employer  has  knowledge. 

(b)  There   is   at   present,    so   far  as   the   employer  has   knowledge, 
no  shortage  in  the  accounts  of  any  employee  bonded  hereunder,  and 
no    misappropriation   by   any   such   employee    of   any   funds   or   other 
property   belonging  to,    or   in   the   custody   of,   the   employer. 

201 


FIDELITY   INSURANCE  AND   CORPORATE   SURETYSHIP. 


(c)  In    so    far   as   the   employer   has   knowledge,    no    one  of   said 
employees    habitually   gambles,    uses   intoxicating    liquors    to    excess, 
frequents  houses  of   ill-fame,   or  is   a   spendthrift  living   beyond   his 
or  her  means. 

(d)  That   the   written    statements   made   to    the   company   by    the 
employer,    regarding   the   indebtedness   to   the   employer   of    the   sev- 
eral   employees    named    in    the    schedule,    truthfully    and    correctly 
show  the  amounts  of  indebtedness  of  each  employee  to  the  employer 
at  the  time  of  making  such  statements,  so  far  as  the  employer  has 
knowledge.      A   copy   of   said   statements,   certified   by   the   company, 
is  delivered   to   the   employer   with   this   bond,    and   receipt   of   same 
is  hereby  acknowledged  by  the  employer. 

In  case  of  the  breach  of  any  of  the  foregoing  warranties  In 
respect  of  any  employee,  then  this  bond  shall  be  void  in  respect 
of  such  employee  only,  and  the  company  shall  be  relieved  from  all 
liability  in  respect  of  such  employee  . 

12.  The    employer    further    covenants    and    agrees    that    the    em- 
ployer will  not  at  any  time  give  the  company  notice  of  the  appoint- 
ment  of,    or    request   the   company   to   become   bound   hereunder,    In 
respect   of,   or   to   renew   or  .continue   this   bond  or   any   engagement 
hereunder   in    respect   of   any   employee   who    has   to    the   knowledge 
of   the    employer,    ever    been    guilty   of    dishonesty,    or   who,    to    the 
knowledge    of    the    employer    habitually    gambles,    uses    intoxicating 
liquors   to   excess,   frequents   houses  of  ill-fame,   or  is   a  spendthrift 
living  beyond   his  or  her  means ;    and  that  on   the  notice  given   by 
the  employer  to  the  company  of  the  appointment  of  any  such  new 
employee,   and  upon  the  request  for  any  renewal  or  continuance  of 
this   bond,   or   any   engagement   hereunder,   the  employer  •will,    upon 
request   of   the   company,    state   truthfully,    in   writing,    the    amount, 
if   any,   which   such  employee   or  employees   may,    to   the  knowledge 
of  the  employer  then  owe  the  latter  by  overdraft,   promissory  note, 
as    endorser   or    otherwise ;    and    any    breach    of    this    covenant    and 
agreement    on    the    part    of    the    employer    shall    render    any    such 
acceptance,    renewal    or    continuance    executed    by    the    company    in 
behalf  of  any  and  every  such  employee  void,  and  relieve  the  com- 
pany from  all  liability  on  account  of  every  such  employee. 

A  copy  of  every  such  statement  so  made  by  the  employer  to  the 
company  regarding  the  indebtedness  of  any  employee,  shall  be 
certified  by  the  company  and  delivered  to  the  employer  with  the 
company's  acceptance  of  the  risk  or  renewal  of  this  bond. 

13.  The   employer   further   .covenants    and    agrees   that   if   at   any 
time   during   the    term    for   which    this    bond    is   written,    or   during 
any   continuance   hereof,   there   shall   come  to  the  knowledge  of  the 
employer  the  fact  that  any   employee  for  whom  the  company   may 
be   bound   under  this   bond,    is   dishonest,   or   has   in   bad  faith   and 
not  through  mere  negligence  or  error  of  judgment,  done  or  neglected 
to   do   any  matter  or   thing,    or  that   any   such  employee  habitually 
gambles,    uses    intoxicating    liquors    to    excess,    frequents    houses    of 
ill-fame,    or   is    a    spendthrift   living   beyond    his   or   her   means,    the 
employer   shall   promptly   notify   the   company   of   such  fact,   and  the 
failure    so    to   do    shall    relieve   the   .company    from    all    liability    on 
account  of  such  employee,    in   respect  of  loss  or  damage   thereafter 
arising. 

202 


FIDELITY   INSURANCE  AND   CORPORATE   SURETYSHIP. 


14.  The   company,   upon   giving   fifteen   days   notice   in  writing  to 
the  employer,   may  at  any  time  cancel  this  bond  and  terminate  its 
responsibility    hereunder    in    respect    of    the    acts    of    any    employee 
done   after   the   expiration   of   the   fifteen   days   from   the   receipt   of 
such  notice  by  the  employer.     If  the  company  subsequently  pay  any 
loss    hereunder    in    respect   of    any    such    employee    the    amount   of 
premium    paid    as    to    such    employee    shall    be    held    to    have   bean 
fully   earned   and   to   belong   to   the   company.      Otherwise    the   com- 
pany shall,  upon  demand  return  to  the  employer  a  pro  rata  portion 
of  the  premium. 

In  the  event  of  the  cancellation  of  this  bond  by  the  company  in 
respect  of  any  employee,  the  employer  may,  by  notice  in  writing 
to  the  company,  cancel  the  bond  in  respect  of  all  other  employees, 
and  such  cancellation  by  the  employer  shall  go  into  effect  at  the 
same  time,  and  be  subject  to  all  the  conditions  relative  to  prem- 
iums, as  the  cancellation  by  the  company. 

15.  Upon   the  death  of   an   employee,   or   upon   his   resignation  or 
discharge    from    the    service   of   the   employer,    the   company,    if   not 
more    than    the    first   annual    payment   shall    have   been    paid,    shall 
be  deemed  to  have  earned  the  whole  of  such  premium ;   but  where 
such    occurrence    takes    place    after    the    second    annual    premium 
shall  have  been  paid  or  become  due,  the  employer  shall  be  entitled 
to   a   pro   rata   portion   of   the   premium    under   the   same   conditions 
as  though  the  .cancellation   had  taken   place   at  the  instance  of  the 
company. 

16.  The  employer  is  directly  liable  to  the  company  for  all  prem- 
iums   provided   for   herein,    and   the   same   shall   be    payable   to   the 
company,   or  to  the  person   by  whom  this  bond  is   delivered  to  the 
employer,    upon    reasonable    demand    in    writing.      If    not    so    paid, 
the    company    may    at    once    terminate    this    bond    by    notice    to    the 
employer,    and    upon    receint    of   such    notice    by    the    employer,    all 
liability   of   the    company   for   the   arts   of   any   and   every   employee, 
committed    during    the    time    for    which    the    company    shall    have 
received    no   premium,    shall    immediately    cease    and   determine. 

17.  The   employer   shall   whenever  required   by  the   company,    give 
all    information    within    the    employer's    knowledge,    or    which    can 
be  obtained  from  the  employer's  books  or  records,  and  shall  render 
all   assistance    (not  pecuniary)    which   will   in   any   way   aid   in  the 
apprehension,   arrest  or  prosecution  of  any  employee,   for  any  crim- 
inal  offense   committed   by  such   employee   involving  the  liability  of 
the    company,    and    in    like    manner    shall    aid    and    assist   the   com- 
pnnv  in   suing  for  or  obtaining   reimbursement  from   such  employee 
or   from    the   employee's   estate   or  from    other   sources   any   moneys 
which    the  company   may   have   paid   or  become   liable  to   pay   under 
this   bond   on    account   of   such   employee. 

18.  The    employer    shall    give    notice    in    writing   to    the    company 
*••  promptly    after  knowledge   thereof   by   the   employer    of   any   loss   in 

respect  of  which  liability  of  the  company  is  claimed,  and  shall 
within  six  months  thereafter,  furnish  the  company  proof  of  such 
loss,  and  in  default  thereof,  the  liability  of  the  company  therefor 
shall  terminate. 

19.  All  notices  to  be  given  by  the  employer  to  the  company  shall 
be   by   registered    mail    addressed   to    the   company    at    its   principal 

203 


FIDELITY   INSURANCE   AND    CORPORATE    SURETYSHIP. 


office  in  the  city  of  ,  and  all  notices  to  be  given  by  the  com- 

pany to  the  employer  shall  be  by  registered   mail  addressed  to  the 
principal  office  of  the  employer. 

20.  In  .case  the  employer  be  a  corporation,   the  knowledge  of  its 
board   of  directors  or  trustees,   or  of  any  executive  officer,   such   as 
the  president,  vice-president,  cashier  or  assistant  cashier  of  a  bank, 
and    corresponding    officers    of    a    savings    bank    or    trust    company, 
who  shall  receive  a  salary  from  the  corporation  and  shall  be  active 
in  its  affairs,  shall  be  deemed  to  be  the  knowledge  of  the  employer, 
excepting    that    the    knowledge    of    any    such    directors,    trustees,    or 
officers   in   collusion  with  the   employee  through  whose   act  the   loss 
may    arise,    shall    not   charge    the   corporation. 

21.  So   long    as   the   company   and   the   employer   agree   so   to   do, 
this   bond   may   be   continued   in    force   from    year    to    year,    and    in 
case    of    such    continuance,    the    company's    liability    in    respect    of 
the    employees   then    in    the    employer's    service    and   for   whom   the 
company    may   then    be   bound    hereunder   shall   be    the    same    as    if 
this   instrument   had    been    originally   written   for   a    term   including 
the  period  of   such  continuance. 

22.  No   action,    suit   or   proceeding   at   law   or   in   equity   shall   be 
had    or    maintained    on    this    bond    unless    the    same    shall    be    com- 
menced  within   one   year  from   the  time  of  making  claim   upon  the 
company  for  the  loss  in   respect  of  which  such  action,  suit  or  pro- 
ceeding is  based,   or,   in  the  event  that  an  action,   suit  or  proceed- 
ing so  commenced  shall  be  discontinued  or  dismissed  without  a  trial 
upon    the   merits   unless    a   further   action,    suit   or   proceeding    shall 
be    commenced    within    thirty    days    after    such    discontinuance    or 
dismissal. 

23.  None   of  the   conditions   or  provisions  contained   in   this   bond 
shall  be  deemed  to  have  been  waived  by  or  on  behalf  of  the  com- 
pany   unless    the    waiver   be    clearly    expressed    in    writing    over    the 
signature  of  its  president  or  vice-president. 

In   witness  whereof,   the   company   has   caused   this   instrument  to 
be  signed  by  its  president,  and  its  corporate  seal  to  be  hereto 

affixed,  duly  attested  by  its  secretary,  the  day  of  , 

A.   D.  19 

,    President. 
,  Secretary. 


SAMPLE  APPLICATION  FOR  CONTRACT  BONDS. 

WORDING    CHANGED    SLIGHTLY    WHEN    FOR    INDIVIDUAL,    FIRM    OR 
CORPORATION. 

Applicants  must  give  full  and  explicit  data  under  the  following 
heads,  and  must  supply  copies  of  specifications  and  contract  for 
filing  with  this  application.  The  information  asked  for  is  essential 
to  the  proper  preparation  of  the  bond  and  the  company's  judgment 
of  the  case,  hence  care  in  answering  will  expedite  the  issuance  of 
the  bond. 

204 


FIDELITY   INSURANCE   AND   CORPORATE    SURETYSHIP. 


1.    Full    name    of    applicant  Age  .  2.    Residence 

3.    Business   address  .  4.    Amount  of   bond 

required,   $  .  5.  To  whom  given?     Give  full  name.      (If 

to  a  corporation,  give  exact  corporate  title,  also  the  business  ad- 
dress of  individual,  firm  or  corporation)  .  6.  Nature  of 
contract  .  7.  Name  and  address  of  architect  or  engineer 
in  charge  .  8.  Amount  architect's  or  engineer's  estimate 
of  the  cost  of  the  work  .  9.  Has  application  for  the 
bond  in  question  been  made  to  another  company?  If  so,  state  par- 
ticulars .  10.  Contract  price  $  .  11.  If  con- 
tract is  per  unit  of  measure,  give  also  probable  total  of  contract, 
$  .  12.  Other  bidders  on  above  contract,  including 
highest  and  lowest.  Name.  Address.  Bid. 

STATEMENT  OF  ASSETS  AND  LIABILITIES. 


ASSETS. 

LIABILITIES. 

Cash  on  hand  
Cash  in  Bank 
Stocks,    Bonds,    etc.,    Mkt. 

Borrowed  or  due  on  Stocks, 

ue  i.    numera  e;  

Real  Estate    (Give    location 

Borrowed   or   due    on    Real 
Estate  

Piece  No    1 

Piece  No    1 

«        «    2 

«         "2                  

«        «    3 

u        u    ^  

«              «       g 

Plant  consisting  of  

Incumbrance  on  Plant  

Stock  of  Supplies 

Notes  Receivable 

Notes  Payable  

Accounts  Receivable  
Other  Assets  

Accounts  Payable  
Other  Liabilities  

TOTAL  ASSETS 



— 

TOTAL  LIABILITIES  

13.   Date  work   is   to   be  commenced  .  14.   Date   work   is 

to    be    completed  .  15.    Penalty    for    non-completion    at 

above    date  .  16.    Premium   for   completion   before   above 

date  .  17.     Payments  .  18.      Percentage     re- 

served  from  payments  until   completion  .  19.    Will  bond 

continue    in    force    after    work    is    completed? 

what   period?  For   what   purpose?  .  21.    Other   fea- 

tures of  contract  .  22.  What  does  your  plant  consist  of? 

(a)   When  was   it  purchased?  (b)   What  is   its  present 

condition?  (c)    Is   any   further   plant   required   at   this    time? 

205 


FIDELITY    INSURANCE   AND   CORPORATE    SURETYSHIP. 


23.  Are   you   in    the   habit   of   borrowing   money    from   your   bank? 
If    so,    please    state    amount    of    loans    now    outstanding,    $ 

24.  How  long  have  you  been  engaged  in  this  line  of  work? 

25.  Enumerate    contracts    you    have   completed    stating    the   amount 
of    each    contract  .  26.    Enumerate    contracts    you    have 
under   way,    giving    present    status    of    each    name    of    your    surety. 


UNCOMPLETED 
CONTRACTS. 

PERCENTAGE    UNCOM- 
PLETED AND  TOTAL 
AMOUNT  OF  CONTRACT. 

NAME  OF  SURETY. 

1  

2  

3  

4  

5  

6  

7  

8  

27.  Amount  of  liability  as  endorser  or  surety  for  others.     $ 

28.  Amount  of   life   insurance  carried.      (Give   names   of  companies 
and  amounts  in  each.)     $  .  29.  Payable  to 

30.    Do   you   carry   liability   insurance?  Give   limit  of   liability 

$  $  .  31.    Give    name    of    companies    and    date    of 

expiration  «.  32.  Amount  of  builders'  risk  insurance  car- 

ried, or  will  carry  on  ttiis  work.  (Give  names  of  companies  and 
amounts  in  each.)  $  .  33.  Refer  to:  Name  of  bank 

,    Town  ,    State 

REFERENCES. 

Of  persons  for  whom  you  have  completed  contracts :  Name. 
Occupation.  P.    O.    Address. 

READ  CAREFULLY. 

I   certify  that   the   answers  given   to  the   foregoing  interrogations 
are   true,   and   in   consideration  of   the  company  consenting   or 

agreeing  to  execute  or  guarantee  the  bond  herein  applied  for  I  do 
hereby  covenant,  promise  and  agree  to  pay  the  premium  or  fees 
herein  agreed  upon,  to  wit:  dollars  per  annum  in  advance, 

made  by  the  company,  for1  executing  said  bond  and  continuing 

the   same,   until   said  company   shall,   in   the   manner  provided 

by  law,  be  discharged  or  released  from  any  and  all  liability  and 
responsibility  upon  and  from  said  bond  and  all  matters  arising 
therefrom,  and  proper  legal  evidence  of  such  discharge  or  release 
be  served  on  the  company,  to  pay  the  said  company  any  and 

206 


FIDELITY   INSURANCE   AND   CORPORATE    SURETYSHIP. 


all  loss,  costs,  charges,  suits,  damages,  counsel  fees,  expenses,  of 
whatever  kind  or  nature  which  said  company  shall  or  may,  for  any 
cause,  at  any  time,  sustain,  or  incur,  or  be  put  to,  for,  or  by  reason 
or  in  consequence  of  said  company  having  entered  into  or  executed 
said  bond.  And  I  do  further  agree,  upon  notice  to  or  discovery 
by  the  company,  of  my  failure  to  comply  with  any  provision 

of   the  contract,  for  the  completion  of  which  the  said  company 

has  issued  the  bond  herein  applied  for,  that  immediately  upon  said 
notice  or  discovery,  the  right  of  possession  of  such  plant  as  I 
may  own  or  have  upon  said  work,  shall  vest  in  the  paid 
company,  so  that  it  may  use  same  in  the  prosecution  of  said  con- 
tract to  completion,  and  the  right  to  the  possession  of  such  plant 
shall  not  be  considered  as  waived  by  any  delay  on  the  part  of 
the  said  company,  to  exercise  said  right  after  the  time  of 

its  vesting.  I  hereby  further  agree  for  myself,  my  heirs,  executors, 
and  administrators,  successors  and  assigns,  to  accept  the  vouchers 
or  other  evidence  of  any  loss  paid  by  the  said  company,  under 

the  aforesaid  obligation,  together  with  vouchers,  or  other  evidence 
of  payment,  of  all  cost  and  expenses  whatever  incurred  by  said 
company,  in  adjusting  such  loss,  or  in  completing  said  con- 
tract, as  conclusive  evidence  against  me  and  my  estate  of  the  fact 
and  extent  of  my  liability,  under  said  obligation  to  the  said 
company. 

And  I  do  further  agree  in  the  event  of  any  breach  or  default 
on  my  part  of  the  provisions  of  the  contract  hereinbefore  men- 
tioned, that  the  company,  as  surety  upon  the  aforesaid  bond, 
shall  be  subrogated  to  all  my  rights  and  properties  as  principal 
in  said  contract,  and  that  deferred  payments,  and  any  and  all 
moneys  and  properties  that  may  be  due  and  payable  to  me,  at  the 
time  of  such  breach  or  default,  or  that  may  thereafter  become  due 
and  payable  to  me,  on  account  of  said  contract,  shall  be  credited 
upon  any  claim  that  may  be  made  upon  the  company,  under 
the  bond  above  mentioned. 

In  testimony  whereof.   I   have   hereunto  subscribed  my  name  this 

day    of  ,    19 

Witness :  Contractor. 


SAMPLE  FORM  NO.  1  FOR  CONTRACT  CON- 
STRUCTURAL  BONDS. 

(CHANGED   SLIGHTLY  IN    WORDING  WHEN   FOR   INDIVIDUALS,   FIRMS 
OB  CORPORATIONS.) 

Know  all  men  by  these  presents,  that  of  (hereinafter 

called  the  principals),  and  the  company,  a  corporation  under 

and  by  virtue  of  the  laws  of  the  State  of  ,  having  an  office 

and  usual  place  of  business  at  city,  state  of  (herein- 

after called  the  surety),  are  held  and  firmly  bound  unto  of 

(hereinafter  called  the  obligee),  in  the  sum  of  dollars, 

for  the  payment  of  which  said  sum  of  money  the  said  principals 
bind  themselves,  their  heirs,  executors,  administrators,  successors 
and  assigns,  and  the  said  surety  binds  itself,  its  successors  and 
assigns,  jointly  and  severally,  firmly  by  these  presents. 

Whereas,  said  principals  have  entered  into  a  written  contract, 
with  said  obligee,  dated  the  day  of  ,  19  ,  for 

207 


FIDELITY   INSURANCE   AND    CORPORATE    SURETYSHIP. 

according   to   the   terms   and   conditions   of   said  contract,   a  copy  of 
which    contract    is    made    part    hereof. 

Now  therefore  the  condition  of  this  obligation  is  such  that  if  the 
said  principals  shall  faithfully  perform  said  contract  according  to 
the  terms,  covenants  and  conditions  thereof  (except  as  hereinafter 
provided),  then  this  obligation  shall  be  void;  otherwise  to  remain 
in  full  force  and  effect. 

This  bond  is  executed  by  the  surety  upon  the  following  express 
conditions,  which  shall  be  conditions  precedent  to  the  right  of  the 
obligee  to  recover  hereunder : 

The  obligee  shall  keep,  do  and  perform  each  and  every,  all  and 
singular,  the  matters  and  things  set  forth  and  specified  in  said 
contract,  to  be  by  the  obligee  kept,  done  and  performed  exclusively 
at  the  times  and  in  the  manner  as  in  said  contract  specified. 

The  said  surety  shall  be  notified  in  writing  of  any  act  on  the 
part  of  said  principals  or  their  agents  or  employees  which  may 
involve  a  loss  for  which  the  said  surety  is  responsible  hereunder, 
immediately  after  the  occurrence  of  such  act  shall  have  <x>me  to 
the  knowledge  of  said  obligee  or  to  any  representative  duly  author- 
ized by  him  to  oversee  the  performance  of  said  contract ;  and  a 
registered  letter  mailed  to  the  president  of  said  surety  at  its  office 
in  city,  ,  shall  be  the  notice  required  within  the  mean- 

ing of   this  bond. 

If  the  said  principals  shall  voluntarily  abandon  said  contract,  or 
be  lawfully  compelled  by  the  obligee  to  .cease  operations  thereunder 
by  reason  of  their  non-performance  of  any  of  its  terms  or  condi- 
tions, then  the  surety  shall  have  the  right,  in  its  option,  to  assume 
the  said  contract  and  to  sublet  or  complete  the  same,  and  if  said 
contract  shall  be  assumed  by  the  surety,  then  as  such  contract  is 
duly  performed  any  reserve,  deferred  payments  and  all  other  moneys 
provided  by  said  contract  to  be  paid  to  the  principals  shall  be  paid 
to  the  surety  at  the  same  time  and  under  the  same  conditions  as 
by  the  terms  thereof,  such  moneys  would  have  been  paid  to  the 
principals  had  the  contract  been  duly  performed  by  them.  And  if 
said  obligee  shall  complete  or  relet  the  said  contract,  then  any 
forfeitures  provided  in  said  contract  against  the  principals  shall 
not  be  operative  as  against  the  surety,  but  all  reserves,  deferred 
payments  and  all  other  moneys  provided  in  said  contract  which 
would  have  been  paid  to  the  principals  had  they  completed  the  con- 
tract in  accordance  with  the  terms,  shall  be  credited  upon  any 
claim  the  said  obligee  may  make  upon  said  surety. 

The  surety  shall  not  be  liable  under  this  bond  to  any  one  except 
the  obligee,  but  it  is  agreed  that  the  obligee  in  estimating  his 
damage,  may  include  the  claims  of  mechanics  and  material  men, 
arising  out  of  the  performance  of  the  contract,  and  paid  by  him 
only  when  the  same,  by  the  statutes  of  the  state  where  the  contract 
is  to  be  performed,  are  valid  liens  against  his  property. 

The  said  obligee  shall  retain  the  last  payment  and  reserve  due 
said  principals  until  the  complete  performance  by  said  principals 
of  all  the  terms,  .covenants  and  conditions  of  the  contract  on  said 
principals'  part  to  be  performed  and  until  the  expiration  of  the 
time  within  which  liens  or  notices  of  liens  may  be  filed,  by  reason 
of  anything  done  in  or  towards  the  performance  of  said  contract, 
and  until  the  cancellation  and  discharge  of  such  liens,  if  any,  and 
said  surety  shall  be  notified  in  writing  before  said  last  payment 
shall  be  made  or  said  reserve  paid. 

The  surety  shall  not  be  liable  for  any  damage  resulting  from 
an  act  of  God,  or  from  mob,  riot,  civil  commotion  or  a  public  enemy, 
or  from  so-called  strikes  or  labor  difficulties,  or  from  fire,  light- 

208 


FIDELITY    INSURANCE    AND    CORPORATE    SURETYSHIP. 


ning,  tornado  or  cyclone,  and  the  surety  shall  not  be  liable  for  the 
reconstruction  or  repair  of  any  work  or  materials  damaged  or 
destroyed  by  said  causes  or  any  of  them,  and  the  said  surety  must 
be  notified  in  writing  and  its  written  consent  secured  to  any 
change  or  alterations  made  in  the  original  plans  or  specifications 
by  the  said  obligee. 

This  bond  does  not  cover  any  provisions  of  the  contract  or  speci- 
fications respecting  guarantees  of  efficiency  or  wearing  qualities  or 
for  maintenance  or  repairs,  nor  does  it  obligate  the  surety  to 
furnish  any  other  bond  covering  such  provisions  of  the  contract 
or  specifications. 

That  if  the  obligee  shall  at  any  time  hold  concurrently  with  this 
bond  or  represent  to  the  surety  in  any  statement  or  declaration  to 
it,  that,  said  obligee  does  or  will  at  any  time  hold  concurrently 
with  this  bond  any  other  bond  or  guarantee  of  .security  received 
in  connection  with  the  contract  covered  by  the  above  bond,  the 
obligee  shall  be  entitled,  in  the  event  of  loss  as  hereinbefore  stated, 
to  claim  hereunder  only  such  proportion  of  the  loss  as  the  amount 
covered  by  this  bond  bears  to  the  whole  amount  of  the  security 
carried,  or  so  stated  to  be  carried,  covering  the  contract  covered 
by  the  above  bond,  whether  the  obligee  shall  be  able  to  reimburse 
himself  from  such  other  bonds  or  guarantee  so  carried  or  stated 
to  be  carried  or  not,  or  whether  the  same  has  been  allowed  to 
lapse  or  not. 

That  any  suits  at  law  or  proceedings  in  equity  brought  on  this 
bond  to  recover  any  claim  hereunder  must  be  instituted  within  six 
months  after  the  first  breach  of  said  contract. 

The  said  surety  shall  not  be  liable  for  an  amount  in  excess  of 
the  penalty  of  this  bond. 

In  testimony  whereof,  the  said  principals  have  hereunto  set  their 
hands  and  seals,  and  the  said  surety  has  caused  this  instrument 
of  writing  to  be  signed  by  its  duly  authorized  officers,  and  its  cor- 
porate seal  to  be  hereunto  affixed  this  day  of  ,  19  . 

(Signature.) 


SAMPLE  FORM  NO.  2  CONTRACT  CONSTRUC- 
TURAL  BONDS. 

Know  all  men   by  these  presents,   that  we  of  (herein- 

after called  the  principal),   as  principal,   and  the  (hereinafter 

called  the  surety),  as  surety,   are  held  and  firmly  bound  unto 
of  (hereinafter  called  the  obligee),  in  the  sum  of  dollars 

($  ),   for  the  payment  whereof  said  principal   binds  and 

said    surety   binds   itself,    firmly   by    these   presents. 

Whereas,  said  principal  has  entered  into  a  written  contract 
dated  ,  19  ,  with  said  obligee,  for  a  copy  of  which 

is   hereto   annexed  : 

Now,  therefore,  the  condition  of  this  obligation  is  such,  that  if 
the  principal  shall  indemnify  the  obligee  against  any  loss  or  dam- 
age directly  arising  by  reason  of  the  failure  of  the  principal  to 
faithfully  perform  said  contract,  then  this  obligation  shall  be  void  ; 
otherwise  to  remain  in  full  force  and  effect. 

Provided,   however,    and   upon    the   express  conditions : 

First:  That  in  the  event  of  any  default  on  the  part  of  the 
principal  in  the  performance  of  any  of  the  terms,  covenants  or 


FIDELITY    INSURANCE   AND    CORPORATE    SURETYSHIP. 


conditions  of  said  contract,  a  written  statement  of  the  particular 
facts  showing  such  default  and  the  date  thereof  shall  be  delivered 
to  the  surety,  by  registered  mail,  at  its  office  in  the  city  of 
promptly  and  in  no  event  less  than  ten  (10)  days  after  the  obligee 
or  his  representative  or  the  architect,  if  any,  shall  learn  of  such 
default :  That  the  surety  shall  have  the  right  within  days 

after  the  receipt  of  such  statement  to  proceed  or  procure  others 
to  proceed  with  the  performance  of  such  contract ;  shall  also  be 
subrogated  to  all  of  the  rights  of  the  principal ;  and  any  and  all 
moneys  or  property  that  may  at  the  time  of  such  default  be  due, 
or  that  thereafter  may  become  due,  to  the  principal  under  said 
contract  shall  be  credited  upon  any  claim  which  the  obligee  may 
make  upon  the  surety,  and  the  surplus,  if  any,  applied,  as  the 
surety  may  direct,  to  indemnifying  it  against  any  loss  or  damage 
by  reason  of  its  suretyship. 

Second :     That  no  claim,  suit  or  action  by  reason  of  any  default 
shall    be   brought   against   the    principal   or   surety   after   the 
day  of  ,  19       ,  nor  shall  recovery  be  had  for  damages  accru- 

ing after  that  date ;  that  service  of  writ  or  process  commencing 
any  such  suit  or  action  shall  be  made  on  or  before  that  date ; 
that  the  principal  shall  be  made  a  party  to  any  such  suit  or  action, 
and  be  served  with  process  commencing  the  same  if  can  with 

reasonable  diligence  be  found ;  that  no  judgment  shall  be  rendered 
against  the  surety  in  excess  of  the  penalty  hereof. 

Third :  That  the  surety  shall  not  be  liable  for  any  damages 
resulting  from  strikes  or  labor  difficulties,  or  from  mobs,  riots, 
fire,  the  elements,  or  acts  of  God,  or  from  injury  to  person  ;  nor  for 
the  repair  or  reconstruction  of  any  work  or  materials  damaged  or 
destroyed  by  any  such  causes ;  nor  for  the  nonperformance  of  any 
guarantees  of  the  efficiency  or  wearing  qualities  of  any  work  done 
or  materials  furnished  or  the  maintenance  thereof  or  repairs 
thereto ;  nor  for  the  furnishing  of  any  bond  or  obligation  other 
than  this  instrument ;  nor  for  damages  caused  by  delay  in  finishing 
such  contract  in  excess  of  per  centum  of  the  penalty  of  this 

instrument. 

Fourth :  That  the  obligee  shall  faithfully  perform  all  the  terms, 
covenants  and  conditions  of  such  contract  on  the  part  of  the  obligee 
to  be  performed ;  and  shall  also  retain  that  proportion,  if  any, 
which  such  contract  specifies  the  obligee  shall  or  may  retain  of 
the  value  of  all  work  performed  or  materials  furnished  in  the 
prosecution  of  such  contract,  not  less,  however,  in  any  event,  than 
per  centum  thereof,  until  the  complete  performance  by  the 
principal  of  all  the  terms,  covenants  and  .conditions  cf  said  con- 
tract on  the  principal's  part  to  be  performed :  That  the  plans  and 
specifications  mentioned  in  such  contract  are  not  in  any  respect 
defective,  and  are  and  at  all  times  will  be  kept  adequate  for  the 
complete  performance  thereof ;  that  no  change  shall  be  made  in 
the  plans  and  specifications  which  shall  increase  the  amount  to 
be  paid  the  principal  more  than  per  centum  of  the  penalty 

of   this  instrument,  without  the  written   consent  of  the   surety. 

Fifth :  That  no  right  of  action  shall  accrue  upon  or  by  reason 
hereof,  to  or  for  the  use  or  benefit  of  any  one  other  than  the 
obligee  herein  named ;  that  the  obligation  of  the  surety  is,  and 
shall  be  construed  strictly  as,  one  of  suretyship  only,  shall  be 
executed  by  the  principal  before  delivery,  and  shall  not,  nor  shall 
any  interest  therein  or  right  of  action  thereon,  be  assigned  without 
the  prior  consent,  in  writing,  of  the  surety. 

Signed    and    sealed,    this  day   of  ,    19 

(Signature.) 

210 


FIDELITY  INSURANCE   AND   CORPORATE   SURETYSHIP. 

SAMPLE  FORM  OF  CONTRACTOR'S  INDEMNITY 
BOND. 

Know  all  men  by  these  presents,  That  (hereinafter  called 

the  "obligors"),  are  held  and  firmly  bound  unto  the  com- 

pany, a  corporation  of  the  state  of  (hereinafter  called  the 

"  company  "),  in  the  sum  of  dollars  ($  ),  lawful  money 

of  the  United  States  of  America,  to  be  paid  to  the  said  company, 
its  certain  attorney,  successors  or  assigns,  to  which  payment,  well 
and  truly  to  be  made,  the  said  obligors  bind  themselves,  their  joint 
and  several  heirs,  executors,  administrators,  successors  and  assigns, 
jointly  and  severally,  firmly  by  these  presents ;  signed,  sealed  and 
dated,  this  day  of  ,  A.  D.  19  ; 

Whereas,    at   the    special    instance    and    request  of   said    obligors, 

and   on   the   security   hereof,    the   company   has   executed,    or   agreed 

to  execute,  a  bond  in  the  penal  sum  of  dollars  ($  ),  on 

behalf  of  (hereinafter  called   the   "contractor"),   in  favor  of 

(hereinafter    called   the    "obligee"),    dated   the  day   of 

,    19        ;    which   said   bond   is   made  to   form,  a   part  hereof, 

as   fully   and   amply,   to   all    intents   and   purposes,    as   if   said  bond 

was  recited  at  length  herein  ; 

Now,  therefore,  the  condition  of  the  aforegoing  obligation  is  such 
if  the  above  bounden  obligors  shall  and  do  pay  in  advance, 

the  premium  or  charge  of  dollars,  made  by  the  company  for 

executing  said  bond  and  continuing  the  same,  so  long  as  the  com- 
pany's liability  on  the  said  bond  or  obligation  shall  continue,  and 
the  said  liability  upon  the  said  bond  or  obligation  shall  continue 
so  long  as  the  above  recited  bond  shall  be  in  force  toid  until  the 
company  shall  be  discharged  or  released  from  any  further  liability 
thereunder,  and  until  sufficient  official  notice,  in  writing,  of  the 
termination  of  the  said  bond  and  the  liability  thereunder,  shall  be 
served  upon  the  company,  and  shall  hold  and  keep  harmless  the 
company  from  and  against  any  and  all  loss,  damages,  costs,  charges 
and  expenses  of  whatever  nature  or  kind  which  the  company  shall, 
or  may,  at  any  time,  sustain,  incur,  or  be  put  to,  for,  or  by  reason, 
or  in  consequence  of  the  company  having  given  and  executed  the 
said  bond ;  also  shall  reimburse  the  company  for  any  and  all 
moneys,  with  interest,  advanced  or  loaned  by  the  company  to  the 
contractor  for  the  purposes  of  said  contract ;  also  for  all  costs, 
counsel  fees  and  expenses  which  it  may  incur  in  investigating  any 
claim  thereunder,  or  investigating  any  application  for  advances  or 
loans,  or  in  or  about  prosecuting  or  defending  any  action,  suit,  or 
other  proceeding  which  may  be  commenced  or  prosecuted  against 
said  contractor,  or  against  the  company,  upon  the  said  bond  or  any- 
wise in  relation  thereto,  then  this  obligation  to  be  void,  otherwise 
to  be  and  remain  in  full  force  and  virtue  ; 

It  is  understood  and  agreed  that  the  liability  of  the  said  obligors 
shall  not  be  changed  or  altered  by  reason  of  any  modification  made, 
either  before  or  after  execution  by  the  parties  thereto  in  any  of 
the  terms  or  conditions  of  the  contract  referred  to  in  said  bond, 
or  in  the  plans  or  specifications,  accompanying  the  said  contract,  or 
by  reason  of  any  extension  of  time  given  to  complete  the  said 
contract,  or  by  reason  of  any  payment  or  advance  being  made  to 
the  contractor  by  the  obligee  before  the  same  may  be  due,  or  by 
the  assignment  of  said  contract  to  the  company ;  and  it  shall  not 
be  necessary  to  either  notify  the  said  obligors,  or  any  one  or  either 
of  them,  or  procure  their  assent  to  any  of  the  aforegoing ;  and  the 
company  is  hereby  authorized  and  empowered  to  advance  or  loan 

211 


FIDELITY   INSURANCE   AND   CORPORATE   SURETYSHIP. 


to  the  contractor  any  money  or  moneys  which  the  company  may  see 
fit  for  the  purposes  of  said  contract,  or  to  assent  to  any  such 
modification  or  modifications  in  the  said  terms  or  conditions,  or 
in  the  said  plans  and  specifications,  either  before  or  after  execution, 
or  to  any  extension  of  time,  or  to  any  such  payment  or  advance 
by  the  obligee,  or  to  take  an  assignment  of  said  contract  without 
notice  to  the  said  obligors,  or  any  one  or  either  of  them,  or  without 
procuring  their  assent  thereto. 

And  it  is  further  agreed,  that  any  and  all  moneys  expended  in  the 
completion  of  said  contract  by  the  company,  or  loaned  or  advanced, 
from  time  to  time  by  the  company  to  the  contractor  for  the  pur- 
poses of  said  contract,  and  all  costs,  counsel  fees  and  expenses 
incurred  by  the  company  in  relation  thereto,  unless  repaid,  with 
interest,  by  the  .contractor  to  the  company  when  due,  shall  be  con- 
clusively presumed  to  be  a  loss  under  this  bond  for  which  the 
obligors  shall  be  responsible,  notwithstanding  said  moneys,  or  part 
thereof,  so  loaned  or  advanced  by  the  company  to  the  contractor 
for  the  purposes  of  said  contract,  should  not  be  used  by  the  con- 
tractor for  the  purposes  of  said  .contract,  it  being  the  intent  hereof 
that  the  company  shall  not  be  obliged  in  any  way  to  see  to  the  appli- 
cation by  the  contractor,  of  said  advances  or  loans  or  any  part 
thereof. 

And  the  said  obligors  hereby  further  jointly  and  severally  agree 
for  themselves,  their  heirs,  executors,  administrators,  successors 
and  assigns,  to  waive  all  notice  of  any  defaults  or  any  other  act  or 
acts,  giving  rise  to  any  claim  under  said  bond  of  suretyship  given 
by  the  company  to  the  obligee  on  behalf  of  the  contractor  as  afore- 
said, or  of  any  and  all  liability  on  the  part  of  the  obligors  hereunder, 
as  well  as  notice  of  any  and  all  liability  of  tb,e  company  under  said 
bond  to  the  obligee  executed  by  the  company  as  surety,  to  the  end 
and  effect  that  the  obligors  shall  jointly  and  severally  be  and  re- 
main liable  to  the  company  under  this  bond,  notwithstanding  any 
notice  of  any  kind  to  which  the  obligors  might  have  been  or  be 
entitled,  and  notwithstanding  also  any  defences  of  any  kind  that  the 
obligors  might  have  been  or  be  entitled  to  make, 

And  this  bond  of  indemnity  shall  be  liberally  construed,  so  as  to 
fully  protect  and  indemnify  the  company, 

Signed,  sealed  and  delivered  in  the  presence  of 

(Signature.) 
State   of  ,  of  ss. : 

Personally  appeared  before  me  on   this  day  of  , 

A.   D.    19       ,   the   above   named  to  me  known   to  be  the  per- 

son ,  who  executed  the  foregoing  instrument  of  writing,  and 
acknowledge  the  same  to  be  h  act  and  deed. 

Witness  my  hand  and  official  seal,  this  day  of  ,  19       . 

State  of  ,  of  ,  ss. : 

On   this  day   of  ,   in   the  year  19  before  me  per- 

sonally   came  ,    president    of    the  ,    with    whom    I    am 

personally  acquainted,  who,  being  by  me  duly  sworn,  said  that  he 
resided  in  the  city  of  ,  that  he  is  the  president  of  the 

,  that  he  knew  the  corporate  seal  of  said  corporation ;  that 
the  seal  affixed  to  the  above  instrument  of  writing  is  such  corporate 
seal ;  that  it  was  affixed  by  order  of  the  board  of  directors  of  said 
corporation  ;  and  that  he  signed  his  name  thereto  by  the  like  order 
as  president  of  said  corporation. 

In  witness  whereof,  I  have  hereunto  set  my  hand  and  affixed  my 
official  seal  the  day  and  year  first  above  written. 

(Signature.) 

212 


FIDELITY    INSURANCE    AND    CORPORATE    SURETYSHIP. 


The  following  instructions  must  be  adhered  to  in  the  execution 
of  this  bond: 

Insert  the  name   and   residence   of   the   principal    and   sureties. 

Insert  the  penalty,   in  words  and  in  figures. 

Insert  the  date    of    the    execution    of    this   bond. 

Insert  the  penalty  of  the  contract  bond,  in  words  and  in  figures. 

Insert  the  name  of  the  party  on  behalf  of  whom  the  contract 
bond  was  written  by  the  company. 

Insert  the  name  and  residence  of  the  party  in  whose  favor  the 
contract  bond  was  written. 

Insert  the  date  of  the  execution    of    the    contract   bond. 

Insert  the  time  of  payment  and  the  premium  the  company  is  to 
receive  for  executing  the  contract  bond. 


SAMPLE    APPLICATION    FORM    USED    IN    JUDI- 
CIAL CASES  FOR  "  SHORT  TERM  "  TRUSTS. 

1.    Name    of    applicant  .  2.    Residence  .  3. 

Occupation  .  4.  Business  address  .  5.  Amount 

of    bond    required,     $  Liability,     $  .  6.    Nature    of 

bond   required  .  7.    Have   you   given   bond    in    this   estate 

before.      If    so,    why    is    change    desired?  .  8.    Bond    filed 

in  court    of  county,     state    of  .  9.     Title    of 

case    or    name    of    deceased  .  10.    Names    and    addresses 

of   attorneys  .  11.   Name   of  bank   in  which  deposits  will 

be   kept  .  12.    Name    of    depository   of    securities,    if    any 

13.   Will   funds   be   so   ear-marked   as   to   be   identified 
at    all    times?  .  14.    Will    cash    coming    in    hand    be    in- 

vested   during    administration?      If    so,    how?  .  15.    State 

whether  you  are  indebted  to  estate.     If  so,  the  amount  and  nature 
of    indebtedness,    and    whether    secured  .  16.    In    whose 

name  are  deposits  kept?  .  17.  Do  you  own  any  property, 

real   or   personal?      If   so,    give   description   and   value   of   same,    and 
if  encumbered,  state  for  what  amount  and  to  whom  due 
18.   Have  you   any  debts   or   liabilities,   individual   or  otherwise?      If 
so,  give  description  and  amount  of  same,  and  state  whether  you  are 
endorser    or    have    become    security    for    any    person    or    corporation 

19.   Date  of   death  .  20.   Names,   addresses 

and  relationship  of  next  of  kin,  legatees,  heirs-at-law  and  all  per- 
sons interested  in  the  estate  .  21.  Give  description  of 
assets  of  estate,  both  real  and  personal  .  22.  Give  list 
of  liabilities  of  estate,  and  to  whom  due  (For  receivers  and 
assignees  .  Give  description  of  assets  .  Also, 
of  liabilities  .  State  if  assets  are  to  be  converted 
into  cash  for  distribution  among  creditors,  or  reorganization  of 
company  expected  .  )  24.  Give  names  and  addresses 
of  four  or  more  persons,  not  related  to  you,  who  have  known  you 
for  some  years  past.  Name,  Profession  or  trade. 
Postal  address  in  full,  street  and  number  in  .cities  (please  write 
names  and  addresses  distinctly) 

READ  THIS  CAKEFULLY. 

certify  that  the  answers  given  to  the  foregoing  interroga- 
tories   are    true,    and    in    consideration    of    the  company    con- 

213 


FIDELITY   INSURANCE   AND   CORPORATE   SURETYSHIP. 

senting  or  agreeing  to  execute  or  guarantee  the  bond  herein  applied 
for  do  hereby  covenant,  promise  and  agree  to  pay  the  premium 

or  fees  herein  agreed  upon,  to  wit :  $  first  year,  and  $ 

each  year  thereafter ;  to  furnish  said  company  with  copies  of  all 
important  court  papers  connected  with  the  settlement  of  the  estate ; 
to  pay  the  said  company  any  and  all  losses,  .costs,  charges,  suits, 
damages,  counsel  fees  and  expenses  of  whatever  kind  or  nature 
which  said  company  shall  or  may  for  any  cause,  at  any  time 
sustain,  or  incur,  or  be  put  to,  for  or  by  reason  or  in  consequence 
of  said  company  having  entered  into  or  executed  said  bond ;  to 
furnish  to  said  company  within  twenty  days  after  the  execution 
of  the  bond  herein  applied  for,  at  its  office  in  the  city  of  , 

a  true  and  perfect  inventory  of  all  the  said  estate,  if  practicable, 
if  not,  a  brief  extract  indicating  the  nature  of  each  class  of  prop- 
erty and  its  estimated  value,  which  shall  come  to  possession 
or  knowledge ;  to  deposit  all  securities  belonging  to  said  estate  in 
the  bank  or  trust  company  above  named,  in  fiduciary  capacity ; 
to  permit  said  .company  or  its  representative  to  examine  them  at 
all  reasonable  times ;  not  to  sell,  dispose  of  or  to  convert  any  of 
the  assets  of  the  estate  into  cash,  without  an  order  of  court  having 
jurisdiction  first  had  and  obtained  ;  to  deposit  all  moneys  and  funds 
belonging  to  the  estate  now  on  hand,  and  also  such  moneys  and 
funds  as  may  come  into  hands,  from  time  to  time,  during 
the  administration  of  said  estate,  from  any  source  whatever,  in 
the  bank  or  banks  aforesaid ;  such  money  to  be  withdrawn  only 
upon  checks  in  fiduciary  capacity  for  the  purpose  connected 
with  the  administration  of  the  trust;  to  keep  just,  true  tnd  accurate 
papers  and  books  of  account  of  said  trust,  which  papers  and 
books  of  account  shall  at  all  reasonable  times  be  open  to  the  free 
and  full  inspection  and  examination  of  the  representative  of  said 
company  ;  to  furnish  said  company  with  reports,  from  time  to  time, 
of  receipts  and  disbursements ;  to  substitute  in  the  event  of 
failure  to  comply  with  any  condition  or  covenant  herein,  other 
sureties  on  the  bond  herein  applied  for,  within  fifteen  days  after 
notice  given  by  said  company  of  default,  said  company 
returning  the  unearned  premium ;  that  if  should  desire,  dur- 
ing the  administration  of  said  estate,  to  substitute,  of  own 
motion,  a  new  bond  for  the  one  herein  applied  for,  will  not 
give  such  new  bond  until  said  company  has  been  legally  released 
from  further  liability,  and  in  the  event  of  said  company  not  being 
legally  released,  agree  to  continue  to  pay  the  premiums 
herein  specified ;  to  pay  all  cost  and  expenses  said  company  may 
incur  in  obtaining  release  or  discharge  as  surety  upon  this  bond 
herein  applied  for  in  case  fail  to  substitute  other  sureties 
as  herein  set  forth,  and  at  the  termination  of  trust,  to  fur- 
nish said  company  with  satisfactory  and  conclusive  evidence  that 
said  trust  has  been  faithfully  and  legally  executed,  and  all  persons 
interested  paid.  do  further  covenant  and  agree  that 
will  at  all  times  keep  the  funds  of  the  estate  separate  from 
private  property ;  that  will  not  mingle  them  with  any  other 
property  entrusted  to  care ;  that  the  estate  shall  always  be 
in  such  a  condition  that  it  can  easily  be  identified;  that  will 
not  use  any  of  said  funds  for  own  purpose,  and  will,  in  all 
transactions,  strictly  comply  with  the  orders  of  the  court  and  the 
requirements  of  the  law  in  the  settlement  of  said  estate;  and  as 
to  bond  herein  applied  for,  do  waive  right  to  home- 
stead or  other  exemption  under  the  laws  of  any  state.  And 
do  further  agree,  if  any  suit  is  brought  on  the  bond  herein  applied 
for,  to  permit  said  company  to  employ  its  own  counsel  or  attorney 

214 


FIDELITY    INSURANCE   AND    CORPOBATE    SURETYSHIP. 


to  defend  such  suit,  and  to  repay  to  said  company  the  fee  of  said 
counsel  or  attorney  and  all  other  costs  and  expenses  to  which  said 
company  may  be  put  in  the  defense  of  such  suit.  do  further 

agree  that  said  company  may,  at  the  end  of  the  trust,  or  any 
other  time,  enquire  of  the  beneficiaries  as  to  the  settlement  of  said 
trust,  or  in  regard  to  its  management. 

In    testimony    whereof  hereunto    subscribe  name    this 

day   of  A.    D.    19 

(Signature.) 


SAMPLE    APPLICATION    FORM    USED    IN    JUDI- 
CIAL  CASES  IN   "LONG  TERM"  TRUSTS. 

1.    Name    of    applicant  .  2.    Residence  .  3. 

Occupation  .  4.  Business  address  .  5.  Amount 

of    bond    required,    $  Liability,     $  .  6.    Nature    of 

bond   required  .  7.    Have   you   given   bond    in    thi«   estate 

before?      If    so,    why    is    change    desired?  .  8.    Name    of 

attorney  .  9.  Name  of  court  in  which  bond  is  filed 

10.    Are    you    indebted    to    trust    estate?      If   so,    state    amount    and 
how  secured  .  11.   Give  full  names,   ages  and  residences 

of   your   wards,    and    the   beneficiaries   of   the    trust  .  12. 

State    names    and    addresses    of    persons    entitled    to    trust    fund    in 
event   of    ward's    death    during    the    trust  .  13.    Give   de- 

scription of  estate  coming  into  your  hands  ;   and  from  what  source 
derived  *  14.    With    whom    are    wards    living,    and    how 

much   is   required  for  their  annual   support?  .  15.   Name 

of   bank   in   which   deposits   will   be   kept  .  16.    Name   of 

bank  or  trust  company  in  which  securities  will  be  kept 
17.   If  any   portion   of   estate   already   invested,   by   whom   and   under 
what    authority?  .  18.    Have    you    any    private    property, 

real   or    personal?      If  so,   give   description   and   value   of   same,   and 
if  encun&ered,  state  for  what  amount  and  to  whom  due 
19.    Have  you   any  debts   or   liabilities,   individual   or   otherwise?     If 
so,    give    description    and    amount   of    same,    and    state   whether    you 
are  endorser  or  have  become  security  for  any  person  or  corporation. 
20.  Give  the  names  and  addresses  of  four  or  more  persons,  not 
related   to   you,    who    have   known    you    for   some   years    past. 
Name.  Profession  or  trade.  Postal  address  in  full,  street 

and  number  in  cities. 

READ  THIS  CAREFULLY. 

certify  that  the  answers  given  to  the  foregoing  interroga- 
tories are  true,  and  in  consideration  of  the  company  con- 
senting or  agreeing  to  execute  or  guarantee  the  bond  herein  applied 
for,  do  hereby  .covenant,  promise  and  agree  to  pay  the  premium 
or  fees  herein  agreed  upon,  to  wit :  $  first  year,  and  $ 
each  year  thereafter ;  to  furnish  said  company  with  copies  of  all 
reports  to  the  court  connected  with  the  estate ;  to  indemnify  and 
keep  indemnified  the  said  company  from  and  against  any  and  all 
loss,  costs,  charges,  suits,  damages,  counsel  fees  and  expenses 
of  whatever  kind  or  nature  which  said  company  shall  or  may, 
for  any  cause,  at  any  time,  sustain  or  incur,  or  be  put  to,  for, 
or  by  reason  or  in  consequence  of  said  company  having  entered 
into  or  executed  said  bond ;  to  furnish  said  company  as  soon  as 

215 


FIDELITY   INSURANCE   AND   COBPOBATE   SURETYSHIP. 


practicable  after  the  execution  of  the  bond  herein  applied  for, 
at  its  office  in  the  city  of  a  true  and  perfect  inventory  of 

all  the  said  estate,  which  shall  come  to  possession  or  knowl- 

edge, enumerating  and  specifically  describing  the  nature  and  char- 
acter of  the  assets ;  to  deposit  all  securities  belonging  to  said 
estate,  in  the  in  the  names  of  the  securities  not  to  be 

removed,  except  with  the  knowledge  and  consent  of  said  company 
or  its  representative;  to  give  said  company  the  privilege  of  examin- 
ing them  at  any  time ;  not  to  sell,  dispose  of,  or  convert  any  of 
the  assets  of  the  estate  into  cash,  without  an  order  of  court  having 
jurisdiction  first  had  and  obtained ;  to  make  all  investments  in 
such  manner  as  under  the  laws  of  the  state  where  the  trust  is 
being  administered,  the  said  company  shall  not  be  responsible  if 
loss  results  to  the  estate  by  reason  of  said  investments ;  to  take 
said  securities  in  my  name  in  my  fiduciary  capacity,  so  that 
they  will  show  upon  their  face  to  what  trust  estate  they  belong; 
to  make  no  investments  except  as  herein  specified,  and  when  prac- 
ticable, to  secure  an  order  of  court  authorizing  the  same  ;  to  keep 
the  estate  so  ear-marked  that  it  can  at  all  times  be  identified ; 
to  report  to  the  court  all  investments  made  by  me,  and  all  securi- 
ties received  from  others,  and  in  respect  to  the  latter  to  convert 
any  of  them  into  cash  which  are  deemed  insecure  and  reinvest 
proceeds  as  herein  provided  ;  to  make  my  reports  to  the  court  when 
required  by  law,  and  to  furnish  said  company  with  copies  of  the 
same ;  to  deposit  all  moneys  and  funds  belonging  to  the  estate 
now  on  hand,  and  also  such  moneys  and  funds  as  may  come  into 

hands,  from  time  to  time,  during  the  administration  of  said 
estate,  from  any  source  whatever,  in  the  ,  reports  to  be  given 

to  the  said  company,  from  time  to  time,  as  to  receipts  and  dis- 
bursements, said  moneys  and  funds  to  be  withdrawn  only  upon 
the  checks,  drafts  or  written  orders  of  in  fiduciary 

capacity,  and  for  purposes  connected  with  the  trust  only ;  to  keep 
just,  true  and  accurate  papers  and  books  of  account  of  said 

trust,  which  papers  and  books  of  account  shall  at  all  reasonable 
times  be  open  to  the  free  and  full  inspection  and  examination  of 
the  representative  of  said  company ;  to  keep  said  estate  separate 
and  distinct  from  all  other  property,  individual  or  otherwise ;  to 
substitute,  in  the  event  ot  failure  to  comply  with  any  con- 

dition or  covenant  herein,  other  securities  on  the  bond  herein 
applied  for,  within  fifteen  days  after  notice  given  by  said 

company  of  default  said  company  returning  the  unearned 

premium ;  that  if  should  desire,  during  the  administration 

of  said  estate,  to  substitute,  of  of  own  motion,  a  new 

bond  for  the  one  herein  applied  for,  will  not  give  such  new 

bond  until  said  company  has  been  legally  released  from  further 
liability,  and  in  the  event  of  said  company  not  be  legally  released, 

agree  to  continue  to  pay  the  premiums  herein  specified ;  to 
pay  all  costs  and  expenses  said  company  may  incur  in  obtaining 
a  release  or  discharge  as  surety  upon  this  bond  herein  applied  for, 
in  case  fail  to  substitute  other  sureties  as  hereinbefore  set 

forth,  and  at  the  termination  of  trust  to  furnish  said  com- 

pany with  satisfactory  and  conclusive  evidence  that  said  trust  has 
been  faithfully  and  legally  executed  and  all  persons  interested  paid ; 
and  as  to  the  bond  herein  applied  for,  do  waive  right 

to  homestead  or  other  exemption  under  the  laws  of  any  state. 
And  do  further  agree,  if  any  suit  is  brought  on  the  bond 

hereiu  applied  for,  to  permit  said  company  to  employ  its  own  counsel 

216 


FIDELITY  INSUBANCE   AND   COEPOEATE   SURETYSHIP. 


or  attorney  to  defend  such  suit,  and  to  repay  to  said  company  the 
fee   of   said   counsel   or   attorney   and   all   other   costs   and  expenses 
to  which  said  company  may  be  put  in  the  defense  of  fuch  suit. 
In    testimony    whereof  hereunto    subscribe  name    this 

day   of  A.    D.    19 

Witness  :  (  Signature. ) 


SAMPLE  APPLICATION  FORM  USED  IN  COURT 
PROCEEDINGS. 

1.    Name    of    applicant  .  2.    Residence  .  3. 

Occupation  .  4.  Business  address  .  5.  Amount 

of  bond   required,   $  .  6.  Name  of  court  in   which  bond 

is    filed  .  7.    Exact   title   of   case  .  8.    Names 

and   addresses   of  attorneys  .  9.   Nature   or   character  of 

the  bond  required,  stating  full  particulars,  as  per  the  following 
instructions : 

INSTRUCTIONS. 

(a)  For    attachment    and    sequestration,    state    the    amount    and 
character  of   the  claim  of   the  plaintiff ;   the  ground  of  the  attach- 
ment or  sequestration,   giving  reference  to   statute   of  state  author- 
izing  its   issuance,   character   of   property   seized   and   what   disposi- 
tion  will   be   made   of   same   during   the   litigation ;    if    garnishment 
state   names    and    addresses   of   garnishees    and   nature   and    amount 
of  property  in  their  hands  ;   also  if  any  prior  attachment  has  been 
issued. 

(b)  For   replevin,    state   facts   upon   which    applicant   bases   right 
to    replevy   and    give   briefly    circumstances    under   which   defendant 
obtained    possession ;    also    what    disposition    will    be    made    of    the 
property   pending   the    suit. 

(c)  For   appeal   or  supersedeas   bond,    state   amount  of  judgment 
or    decree,    give    description    and    location    of    real    estate    owned   by 
applicant,  whether  there  is  any  other  encumbrance  on  said  property, 
if  so,    amount  of   same   and   to   whom  due ;    also   state   if  judgment 
will  remain  a  lien  upon  real  estate  pending  appeal  and  give  refer- 
ence to   statute  of  state  bearing  on   this   point. 

(d)  For    injunction,    state    briefly    the    substance    of    the    bill    or 
petition  asking  for  injunction,  and  attach  copy  of  restraining  order. 

(e)  For  bond  releasing  or  dissolving  attachment,  state  character 
and  value   of  property  attached   and  what  disposition   of  same  will 
be  made  pending  the  suit. 

(f)  For  forthcoming,  claim  and  delivery  and  other  similar  bonds, 
set  forth  fully  the  facts  which  induce  the  applicant  to   regard  the 
property    as    his   own ;    also    what   he    intends   to    do   with   it   when 
he  obtains  possession. 

(g)  In  all  other  cases  where  bond   is  required  in  any  legal  pro- 
ceedings,   state    fully    and    particularly    all    the    facts    of    the    case 
having   any   bearing   upon   the   risk   involved. 

10.  Have  you  any  private  property,  real  or  personal?  If  so, 
give  description  and  value  of  same,  and  if  encumbered  state  for 
what  amount  and  to  whom  due  .  11.  Have  you  any 

debts  or  liabilities,  individual  or  otherwise?  If  so,  give  description 
and  amount  of  same,  and  state  whether  you  are  endorser  or  have 
become  security  for  any  person  or  corporation  .  ''  12. 

217 


FIDELITY   INSURANCE   AND   COBPOftATE   SURETYSHIP. 


Give  the  names  and  addresses  of  four  or  more  persons,  not  related 
to  you,  who  have  known  you  for  some  years  past  Name. 

Profession   or   trade  Postal    address    in    full,    street   and   num- 

ber in  cities. 

certify  that  the  answers  given  to  the  foregoing  interroga- 
tories are  true,  and  in  consideration  of  the  company  con- 
senting or  agreeing  to  execute  or  guarantee  the  bond  herein  applied 
for  do  hereby  covenant,  promise  and  agree  to  pay  the  premium 
or  fees  herein  agreed  upon,  viz.  :  dollars  ($  )  per  an- 
num, and  at  the  termination  of  the  case  to  furnish  said  company 
with  satisfactory  and  conclusive  evidence  that  there  is  no  further 
liability  on  said  bond ;  and  to  reimburse  the  said  company  for 
any  and  all  loss,  costs,  charges,  suits,  damages,  counsel  fees  and 
expenses  of  whatever  kind  or  nature  which  said  company  shall  or 
may,  for  any  cause,  at  any  time,  sustain  or  incur,  or  be  put  to, 
or  by  reason  or  in  consequence  of  said  company  having  entered 
into  or  executed  said  bond. 

And  do    expressly   waive,    as    to   this   obligation,    the   benefit 

of  exemption,    or    the    homestead    provision,    to    which 

entitled  under  the  laws  of  any  state  of  the  United  States.  And 
do  further  agree,  if  any  suit  is  brought  on  the  bond  herein 
applied  for,  to  permit  said  company  to  employ  its  own  counsel  or 
attorney  to  defend  such  suit,  and  to  repay  to  said  company  the 
fee  of  said  counsel  or  attorney  and  all  other  costs  and  expenses 
to  which  said  company  may  be  put  in  the  defense  of  such  suit. 

In    testimony    whereof,  hereunto    subscribe  name    this 

day   of  A.    D.    19 

(Signature.) 


SAMPLE  FORM  OF  APPLICATION  USED  FOR 
BONDS  OF  INDEMNITY. 

USED    FOB    LOST    INSURANCE    POIJCIES,    CHECKS,    BONDS,    NOTES, 
CERTIFICATES   OF  DEPOSIT,   CERTIFICATES   OF   STOCK,   WARE- 
HOUSE  AND   STORAGE    RECEIPTS,    ETC. 

1.    Name    of    applicant  .  2.    Occupation  Business 

address  .  3.     Residence  .  4.     Pull     name    of 

obligee  .  5.     Number     of     instrument  .  6. 

Amount   of    instrument,    $  ^  7.    Name    of    beneficiary    or 

payee,     etc.  .  8.     Amount    to     be    paid     on     instrument, 

$  .  9.    Nature    of    payment  .  10.    Amount    of 

bond   required,    $  .  11.   Amount   of   premium  to   be   paid 

upon  execution  of  bond,   $ 

INSTRUCTIONS. 

The  applicant  should  make  an  affidavit  stating:  (1)  his  interest 
in  the  instrument;  (2)  that  he  has  never  assigned  or  hypothecated 
that  interest;  (3)  the  facts  surrounding  the  loss  of  the  instrument; 
(4)  the  approximate  value  of  his  estate  over  and  above  all  debts 
or  liabilities. 

It  is  further  required  that  every  beneficiary  under  the  instru- 
ment make  an  aftldavit  stating  that  he  has  never  assigned  or 
hypothecated  his  interest.  If  there  has  been  an  assignment  by 
any  party  formerly  in  interest,  it  should  be  especially  set  forth 
by  the  applicant. 

218 


FIDELITY    INSURANCE    AND    COBPOBATE    SUBETYSHIP. 

State   of  ,   county  of  ,   SB.  : 

I,  of  in  the  county  of  and  state  of  ,  being 

duly  sworn  on  oath,  depose  and  say  that  I  am  the  owner  of  a 
certain  ,  and  that  on  or  about  the  I  lost  the  same  in 

the    following    manner,    viz. :  ,    that    I    have    made    due    and 

diligent    search    for   said  but    have   not   found    the    same,    and 

that  I  have  not  sold,  assigned,  -  endorsed,  transferred  or  hypothe- 
cated said  or  any  interest  therein  in  any  manner  whatsoever. 
That  my  approximate  assets  over  and  above  all  my  debts  and  liabil- 
ities are  of  the  value  of  $  .  And  I  do  further  declare  that 
this  statement  is  made  for  the  sole  purpose  of  securing  a  bond  of 
indemnity  from  the  company  to  the 

In  witness  whereof  I  hereunto   subscribe  my  name  this  day 

of  ,   A.    D.    19       .  (Signature.) 

,    State   of  ,    19 

Subscribed  and  sworn  to  before  me.  ,  Notary  Public.     Com- 

mission  expires. 

12.  Give  the  names  and  addresses  of  persons  not  related  to   you 
who  have  known  you  for  some  years  past.      Name  of  references. 
Occupation.  Address. 

(The  agreement  of  indemnity  must  be  executed  by  all  parties 
having  an  interest  in  the  instrument.) 

This    agreement,    made    this  day    of  in    the    year    one 

thousand   nine   hundred   and  ,   by   and   between  part     of 

the    first    part,    and    the  company,    having    its    home   office    in 

the  city  of  ,  party  of  the  second  part,  witnesseth: 

Whereas,  at  the  special  instance  and  request  of  the  part  of  the 
first  part,  and  on  the  security  hereof,  the  company  is  about 

to  become  surety  for  said  party  or  parties  of  the  first  part  on  a 
certain  bond  conditioned  as  therein  mentioned,  a  copy  of  which 
bond  is  hereto  annexed,  and  forms  a  part  of  this  agreement. 

Now,  therefore,  in  consideration  of  the  premises  and  of  the 
sum  of  one  dollar  in  hand  paid  to  said  part  of  the  first  part, 
the  receipt  whereof  is  hereby  acknowledged,  the  said  'jart  of  the 
first  part  do  hereby  agree  and  bind  h  se  ,  h  heirs 

and  assigns,  jointly  and  severally,  as  follows,  to  wit : 

That  said  part  of  the  first  part  shall  and  will  at  all  times  in- 
demnify, and  keep  indemnified,  and  save  harmless  the  said  com- 
pany from  and  against  all  loss,  damages,  costs,  charges,  counsel 
fees  and  expense  whatsoever  which  said  company  shall  or  may, 
for  any  cause,  at  any  time,  sustain  or  incur  by  reason  or  in  con- 
sequence of  said  company  having  executed  said  bond ;  and  does 
further  covenant  and  agree  to  pay  to  said  company  or  its  repre- 
sentatives all  damages  for  which  said  .company  or  its  representatives 
shall  become  responsible  upon  the  said  bond  before  said  company 
or  its  representatives  shall  be  compelled  to  pay  the  same,  any  sum 
so  paid,  however,  to  be  applied  to  the  payment  of  such  damages ; 
and  in  case  any  suit,  action  or  other  proceeding  shall  be  com- 
menced by  or  notice  served  on  said  part  of  the  first  part  in  any 
manner  relating  to  or  growing  out  of  the  matter  or  business  for 
or  on  account  of  which  the  aforesaid  bond  was  required  to  be 
executed,  immediate  notice  thereof  shall  be  given  to  said  company 
at  its  offices  in  the  city  of  , 

That  the  said  part  of  the  first  part  will  pay  to  the  said  party 
of  the  second  part,  or  its  duly  authorized  agent,  the  premium 
stipulated  in  this  application  to  be  paid. 

In  witness  whereof,  the  said  part  of  the  first  part  ha  hereto 
set  hand  and  seal  the  day  and  year  first  above  written. 

(Signature.) 

219 


FIDELITY   INSUBANCE   AND   COEPOBATE   SUBETYSHIP. 

State  of  ,   county  of  ,   ss. : 

On   this  day   of  ,    19       ,    before   me   personally   came 

to   me   known,    and   known   to   me  to   be   the   individual     de- 
scribed  in    and   who   executed   the   foregoing   instrument,    and 
duly  acknowledged  to  me  that  had  executed  the  same. 

,  Notary  Public. 


SAMPLE   APPLICATION    FORM    USED    FOR 
COUNTY  AND  STATE  OFFICIALS,  ETC. 

1.  Name  of  applicant  Age  .  2.  Single  or  married? 

3.  Residence  (street  and  number),  .  4.  Town, 

city  and  state  .  5.  Official  address.  County  seat 

6.  Father.  Occupation.  (If  parents  are  dead,   five  names 
and  addresses  of  some  male  relatives.)  Address 

7.  Mother.  Address  .  8.    Give   exact   title    of   state, 
county    or    municipal    government,    public    official    or    individual    to 
whom  bond  is  to  be  given              .  9.  Address  .  10. 
Amount  of  bond,  $              to  date  from              .              11.  Official  title 
of   applicant                  .                  12.   Date  of   your  election? 

13.  Term   begins  .  Term   ends 

14.  What    is    your    compensation?       (If    commissions,    state 
the  percentage   and  approximate   annual   income  therefrom.) 

15.  How  is  same  paid  to  you?  .  16.  State  fully  the  duties 

and  responsibilities  of  the  office  .  17.  Do  you  collect 

taxes?  Give  amount  of  levy.  $  .  .18.  Are  you  liable 

for  uncollected  taxes?  .  19.  How  are  you  relieved  from 

such  responsibility?  .  20.  Approximate  amount  of 

money  handled  during  the  year,  $  .  21.  During  what 

month  are  your  largest  receipts?  .  22.  Largest  amount 

apt  to  be  under  your  control  at  any  time?  $  .  23.  For 

what  length  of  time  is  this  amount  apt  to  be  under  your  control? 

24.  Give  average  daily  handlings.  $  .  25. 

Where  are  funds  deposited?  .  26.  By  whom  is  such  de- 

pository designated?  .  27.  Does  the  law  require  the  funds 

to  be  deposited  as  above  stated?  .  28.  Are  you  responsible 

for  the  failure  of  the  depository?  .  29.  In  what  name 

are  the  above  mentioned  deposits  kept?  .  30.  Are  funds 

withdrawn  from  depository  by  check  of  applicant?  .  31. 

If  so,  is  the  countersignature  of  any  one  required,  and  of  whom? 

32.  Are  funds  paid  out  upon  warrants  of  other 
officials?  .  33.  Do  these  warrants  accompany  or  become 

part  of  your  checks  or  drafts  upon  the  depository?  Give  par- 

ticulars and  furnish  samples  of  tax-bills,  checks,  warrants,  etc. 

34.  When  are  you  required  to  make  reports?  Give 
dates  .  35.  To  whom  do  you  make  same? 

36.  When   are   your   accounts   examined?      Give   dates 

37.  Who  makes  these  examinations?  .  38.  When  are  you 
required    to    make    settlements?      Give    dates  .  39.    With 
whom    do    you    make    same?              .              40.    Have    you    previously 
occupied  this  position?              .              41.   If  so,   during  what  period? 
From              1              to              1                             42.  Who   then  furnished 
you    bond?              .              43.    Why    is    change    now    desired? 

44.   Has  your   application   to   a   surety  company  for  bond   ever   been 
declined?  .  45.  If  so,  give  name  of  company  and  reason 

assigned   for  such  declination  .  46.   What  was  your  em- 

220 


FIDELITY   INSURANCE    AND    CORPORATE    SURETYSHIP. 

ployment  prior  to  the  acceptance  of  the  position  for  which  bond 
is  desired?  .  47.  Name  and  address  of  last  employer 

•  48.  Will  you  continue  in  any  business  or  employment 

during  your  term  of  office?     If  so,   state  character  of  same 
49.   What  will  be  your  probable  net  income  from  such  business  or 
employment?  .  50.    Do    you    own    any   property,    real    or 

personal?  If  so,  give  description  and  value  of  same  and  state 
amount  of  incumbrance,  if  any  thereon  .  51.  What 

amount    of    life    insurance    do    you    carry?  .  52.     State 

nature  of  policies,  name  of  companies  and  to  whom  payable 
53.   Give   amount  of   your  debts   other  than   liens   on   property,   and 
state   whether   you   are   endorser   or   have   become   security   for   any 
individual,  firm  or  corporation  .  54.  Give  the  names  and 

addresses  of  four  or  more  persons,  not  related  to  you,  who  have 
known  you  for  some  years  past,  writing  names  and  addresses  dis- 
tinctly. Names  of  references.  Occupation.  Postal 
address  in  full,  give  street  numbers  in  cities  also  state. 

I  certify  that  the  answers  given  to  the  foregoing  interrogatories 
are  true,  and  in  consideration  of  the  company  executing  the 

bond   herein   applied   for   I   do   hereby  covenant,   promise   and   agree 
to    pay    the    premium    or    fees    hereafter    agreed    upon,    viz. : 
($  )    per   annum   in   advance,    and   to   pay   said   company  any 

and  all  loss,  costs,  charges,  suits,  damages,  counsel  fees  and 
expenses  of  whatever  kind  or  nature,  which  said  company  shall 
or  may,  for  any  cause  at  any  time,  sustain,  or  incur,  or  be  put 
to,  for  or  by  reason  or  in  consequence  of  said  company  having 
entered  into  or  executed  said  bond ;  and  do  expressly  waive,  as 
to  this  obligation,  the  benefit  of  my  exemption,  or  the  homestead 
provision,  to  which  I  am  entitled  under  the  laws  of  any  state  of 
the  United  States. 

I  further  covenant,  promise  and  agree  to  render  to  the  said 
company  when  requested,  a  statement  showing  all  receipts 
and  disbursements  of  my  office,  and  the  balances  on  hand  and 
in  bank  with  certificate  of  bank  or  banks  covering  raid  balances 
and  to  allow  any  duly  authorized  representative  of  the  said  com- 
pany full  and  immediate  access  to  all  books,  records,  cash,  securities, 
etc.,  and  I  further  agree  to  render  all  such  reasonable  facilities 
and  assistance  as  may  be  necessary  for  him  to  arrive  at  a  full 
and  complete  knowledge  of  the  true  condition  of  my  said  office. 

I  further  covenant,  promise  and  agree  to  file  with  the  said 
company    at    the    office    of    the    said    company    in  ,  ,    a 

duplicate  of  all  receipts  for  transfer  of  funds,  and  of  the  cer-< 
tiflcates  of  each  and  every  examination  of  the  condition  of  my 
aforesaid  office,  as  by  law  required  to  be  made,  or  which  shall  at 
any  time  be  made  by  any  person  or  officer,  after  said  certificate 
shall  have  been  delivered  to  me. 

I  further  covenant  and  agree  that  I  will  not  substitute  another 
bond  for  the  one  herein  applied  for,  during  my  present  term  of 
office,  without  first  notifying  said  company,  and  also  having  said 
company  legally  released  from  all  liability  from  and  after  the  date 
of  said  new  bond ;  and  upon  my  failure  to  comply  with  this  covenant, 
or  any  part  thereof,  I  agree  to  continue  to  pay  the  premium  as 
hereinabove  set  out. 

I  further  covenant,  promise  and  agree  to  bond  in  reasonable 
penalties  with  good  and  sufficient  surety  (giving  preference  at  all 
times,  where  circumstances  will  permit,  to  corporate  suretyship), 
each  and  every  one  of  the  employees  of  my  office  occupying  posi- 
tions where  by  reason  thereof  pecuniary  loss  to  me  would  be 
possible. 

221 


FIDELITY   INSURANCE    AND    COEPOEATE    SUEETYSHIP. 


I    further    agree    that    said  company    may    decline    to    issue 

said  bond  hereby  applied  for,  and  in  case  it  does  issue  said  bond, 
it  shall  have  the  right  to  withdraw  or  cancel  the  same  whenever 
it  shall  see  fit ;  and  in  any  event  the  company  shall  not  be  re- 
quired to  disclose  the  reasons  upon  which  its  action  is  based  and 
shall  not  be  regponsile  for  any  loss  or  damage  that  I  may 
sustain  by  reason  of  such  action. 

In  testimony  whereof,   I  hereunto  subscribe  my  name  this 
day  of  ,  A.  D.,   19     . 

( Signature. ) 
Witness  : 


SAMPLE   APPLICATION  FORM  USED    FOR   U.   S. 
GOV'T.  OFFICIALS. 

Application    by  of  for  a   bond  of   $  as  the 

service    of    the    U.     9.     Gov't     under  at  In    the     State 

of 

ANSWER  EACH  QUESTION  FULLY. 

1.    Full   name    of    applicant  Age  years  .  2. 

Where    born?  .  3.    Present    address    (residence)? 

4.    Single,    married    or    widower?  .  5.    When    were    you 

appointed    to    your    present    position?  .  6.    From    what 

date  is  your  bond  to  be  written?  .  7.  What  salary  will 

you  receive?  .  8.  Have  you  any  income  other  than  your 

salary?      If   so,    how   much   and   from   what   source   derived? 
9.   Do  you   possess   any   real  estate?      If   so,   approximate   its   value 
10.    State   amount   of   incumb ranee    on   real    estate,    if 
any  .  11.    Approximate    the    value     of     your     personal 

property  .  12.    What   was    your    occupation    immediately 

preceding    your    present    appointment?  .  13.    Give    name 

of  your  last  employer  Address  .  14.  Give  the  names 

and  addresses  of  four  or  more  persons,  not  related  to  you,  who 
have  known  you  for  some  years.  Name.  Profession  or 

trade.  Postal  address  in  full,  street  and  number  in  cities. 

I   certify  that  the  answers  given   to  the  foregoing  interrogatories 
are  true,   and   in   consideration   of   the  company   consenting  or 

agreeing  to  execute  or  guarantee  the  bond  herein  applied  for,  I 
do  hereby  covenant,  promise  and  agree  to  pay  the  premium  or  fee 
hereafter  agreed  upon,  to  wit :  dollars  ( $  )  per  annum, 

in  advance,  to  comply  with  all  the  conditions  established  by  said 
company  for  its  own  protection,  and  to  reimburse  the  said  com- 
pany for  any  and  all  loss,  costs,  charges,  suits,  damages,  counsel 
fees  and  expenses  of  whatever  nature  or  kind  which  said  company 
shall  or  may,  for  any  cause,  at  any  time,  sustain  or  incur,  or  be 
put  to,  for,  or  by  reason  or  in  consequence  of  said  company  having 
entered  into  or  executed  said  bond. 

I    further    agree    that    said  company    may    decline    to    issue 

said  bond  hereby  applied  for,  and  in  case  it  does  issue  said  bond, 
shall  have  the  right  to  withdraw  or  cancel  the  same  whenever 
it  shall  see  fit ;  and  in  any  event  the  company  shall  not  be  re- 
quired to  disclose  the  reasons  upon  which  its  action  is  based  and 
shall  not  be  responsible  for  any  loss  or  damage  that  I  may 
sustain  by  reason  of  such  action. 

In    testimony    whereof,    I    hereunto    set    my    hand    this  day 

of  ,    19       . 

Witness:  (Signature.) 

222 


FIDELITY   INSURANCE   AND   CORPORATE   SURETYSHIP. 

SAMPLE  APPLICATION  FORM  USED  FOR  UNITED 
STATES  INTERNAL  REVENUE  TOBACCO  AND 
CIGAR  MANUFACTURERS  BONDS. 

1.  Name  of  applicant  Age  .  2.   Residence 

3.    Name    of    manager    of    factory  .  4.    Residence 

5.    Business   address  .  6.   Amount   of  bond   or  bonds  re- 

quired,    $  .  7.     Por    what    purpose    required?       (State 

whether   for    "Cigar,"    "  Plug,"    "  Cigarette,"    or   Cut   Tobacco   Fac- 
tory.) .  8.   In  what  State  is  the  factory  located? 
9.    In    what    Internal    Revenue    district?  .  10.    Name   of 
the  collector  for  that  district             .              11.   Address  of  collector 

12.    Official    number    of    factory  13.    Lo- 

cation,   giving    street,    number    and    portion    of    building    occupied 

14.  If  machines  are  used,  state  number  and  char- 
acter of  same,  also  number  of  hands  employed  .  15.  If 
machines  are  not  used,  state  number  of  hands  employed  in  manu- 
facturing the  various  lines  .  16.  How  long  have  you 
been  operating  at  above  address?  .  17.  How  long  have 
you  been  engaged  in  the  manufacture  of  tobacco?  .  18. 
Have  you  ever  had  any  trouble  with  the  Internal  Revenue  depart- 
ment? .  19.  If  so,  state  particulars  .  20.  If 
applicant  is  engaged  in  any  other  business,  state  character  of  same 
and  business  address  .  Applicant  must  make  statement 
of  his  holdings,  including  value  of  tobacco  in  stock. 

STATEMENT  OF  ASSETS  AND  LIABILITIES. 


Cash  on  hand  and  in  Bank.  . 
Stocks    Bonds    etc     Market 

Borrowed  or  due  on  Stocks, 
Bonds  etc                          .  . 

Value 

Real  Estate,  consisting  of  .  .  . 

Borrowed    or    due    on    Real 

Estate 

Plant,  consisting  of  

Incumbrance  on  plant  ...    . 

Notes  Receivable  
Accounts  Receivable  
Other  Assets 

Notes  Payable  
Accounts  Payable  
Other  Liabilities  

TOTAL  ASSETS  

.".' 

TOTAL,  LIABILITIES  

If   applicant  is   a   stock  .company,    give   amount   of   capital   stock, 
amount  paid  in,  names  of  executive  officers,  etc. 

223 


FIDELITY   INSURANCE   AND   COEPOBATE   SURETYSHIP. 


REFERENCES. 

Name.  Profession    or    trade.  Postal    addrass    in    full, 

street  and  number  in  cities. 

certify  that  the  answers  given  to  the  foregoing  interroga- 
tories are  true ;  and  in  consideration  of  the  company  con- 
senting or  agreeing  to  execute  or  guarantee  the  bond  herein  applied 
for  do  hereby  covenant,  promise  and  agree  to  pay  the  prem- 
ium or  fees  hereafter  agreed  upon,  viz. :  ($  )  per  annum, 
in  advance,  made  by  the  company  for  executing  said  bond 
and  continuing  the  same,  until  said  company  shall,  in  the 
manner  provided  by  law,  be  discharged  or  released  from  any  and 
all  liability  and  responsibility  upon  and  from  said  bond  and  all 
matters  arising  therefrom,  and  proper  legal  evidence  of  such  dis- 
charge or  release  be  served  on  the  company  and  also, 
to  pay  the  said  company  any  and  all  loss,  costs,  charges,  suits, 
damages,  counsel  fees  and  expenses  of  whatever  kind  or  nature 
which  said  company  shall  or  may,  for  any  cause,  at  any  time, 
sustain  or  incur,  or  be  put  to,  for,  or  by  reason  or  in  consequence 
of  said  company  having  entered  into  or  executed  said  bond. 

further  agree  that  said  company  may  decline  to  issue 

said  bond  hereby  applied  for,  and  in  case  it  does  issue  said  bond, 
it  shall  have  the  right  to  withdraw  or  cancel  the  same  whenever 
it  shall  see  fit ;  and  in  any  event  the  company  shall  not  be  re- 
quired to  disclose  the  reasons  upon  which  its  action  is  based  and 
shall  not  be  responsible  for  any  loss  or  damage  that  may  sustain 
by  reason  of  such  action. 

In  testimony  whereof,   I  hereunto  subscribe  my  name  this 
day  of  ,   A.   D.,    19     . 

Witness  :  (  Signature. ) 


SAMPLE  APPLICATION  FORM  USED  FOR  UNITED 
STATES  INTERNAL  REVENUE  DISTILLERS  AND 
WAREHOUSING  BONDS. 

1.    Name    of    applicant  .  2.    Residence  .  3. 

Name  of  manager  of  distillery  or  warehouse  .  4.   Resi- 

dence .  5.    Business    address  .  6.    Amount   of 

bond    or    bonds    required,    $  .  7.    For    what    purpose    re- 

quired? (State  whether  "Annual  Distillers,"  "Monthly  Ware- 
housing," "  Transportation  for  Warehousing,"  "  General  Bonded 
Warehouse,"  "  Special  Bonded  Warehouse,"  "  Export  Bonds,"  etc.) 

8.  In  what  State  is  the  distillery  or  warehouse 
located?  .  9.  In  what  Internal  Revenue  district? 

10.    Name    of    the    collector    for   that    district?  .  11.    Ad- 

dress  of   collector  .  12.    Official   number   of   distillery   or 

distilleries  .  13.    Locations    and    numbers    of    warehouses 

14.  Length  of  time  distilleries  are  apt  to  be  in  opera- 
tion in  each  year  .  15.  Monthly  capacity  of  distilleries 
in  barrels  .  16.  Storage  capacity  of  warehouses  in  bar- 
rels. Give  each  warehouse  separately  .  17.  If  applicant 
is  engaged  in  any  other  business,  state  character  of  same  and  busi- 
ness address 

224 


FIDELITY   INSUEANCE    AND    COBPOBATE    SUBETYSHIP. 

STATEMENT  OF  ASSETS  AND  LIABILITIES. 


Cash  on  hand  and  in  Bank  .  . 
Stocks.  Bonds,  etc.,  Market 
Value  .                         .    . 

Borrowed  or  due  on  Stocks, 
Bonds,  etc.  .  .  

Real  Estate,  consisting  of  .  .  . 

Borrowed    or    due    on    Real 
Estate 

Plant,  consisting  of   . 

Incumbrance  on  plant  

.... 

Stock  of  Supplies 

Notes  Receivable 

Notes  Payable  

Accounts  Receivable  
Other  Assets  

Accounts  Payable  
Other  Liabilities  

TOTAL  ASSETS  

TOTAL,  LIABILITIES  

18.    If    applicant    is    a    stock    company,    give    amount    of    capital 
stock,  amount  paid  in,  names  of  executive  officers,  etc. 
Name.  Profession  or  trade.  Postal  address  in  full,   street 

and  number  in  cities.  (Please  write  names  and  addresses  dis- 
tinctly.) 

certify  that  the  answers  given  to  the  foregoing  interroga- 
tories are  true,  and  in  consideration  of  the  company  execut- 
ing the  bond  herein  applied  for  do  hereby  covenant,  promise 
and  agree  to  pay  the  premium  or  fees  hereafter  agreed  upon,  viz. : 
to  indemnify,  and  to  keep  indemnified,  the  said  company 
from  and  against  any  and  all  loss,  costs,  charges,  suits,  damages, 
counsel  fees  and  expenses  of  whatever  kind  or  nature,  which  said 
company  shall  or  may,  for  any  cause,  at  any  time,  sustain,  or 
incur,  or  be  put  to,  for  or  by  reason  or  in  consequence  of  said 
company  having  entered  into  or  executed  said  bond. 

further  agree  that  said  company  may  decline  to  issue 

said  bond  hereby  applied  for,  and  in  case  it  does  issue  said  bond, 
it  shall  have  the  right  to  withdraw  or  cancel  the  same  whenever 
it  shall  see  fit;  and  in  any  event  the  company  shall  not  be  re- 
quired to  disclose  the  reasons  upon  which  its  action  is  based  and 
shall  not  be  responsible  for  any  loss  or  damage  that  may  sustain 
by  reason  of  such  action. 

In    testimony    whereof,  hereunto    subscribe  name    this 

day    of  ,    19 

(Signature.) 


SAMPLE   APPLICATION   FORM   USED    FOR   MIS- 
CELLANEOUS BONDS. 

(Wording  Changed  to  Suit  Special  Contingencies.) 


1.    Exact    title    of    corporation 

3.    In     what     State? 

225 


2.    When    incorporated 
4.    Principal    office 


FIDELITY    INSURANCE   AND    COBPORATE    SURETYSHIP. 


5.  Character  of  business  .  6.  Amount  of  bond 

required,     $  .  7.    To    whom    given  Addrsss 

8.  Nature  or  character  of  the  guarantee  required,  stating  full  par- 
ticulars. (If  bond  is  given  for  carrying  out  any  agreement,  or  for 
compliance  with  certain  laws,  ordinances,  etc.,  a  copy  of  the  agree- 
ment, etc.,  or  abstract  from  the  laws  should  accompany  the  appli- 
cation.) Bond  is  given  for  .  9.  Who  is  authorized  under 
your  charter  to  make  a  valid  contract  binding  on  the  company,  or 
who  is  the  proper  officer  or  officers  to  sign  a  sealed  instrument 
of  writing?  .  10.  What  is  the  authorized  capital  of  the 
11.  How  much  of  above  has  been  sub- 
12.  How  much  has  been  paid  in?  $ 


company?      $ 
scribed?    $ 


STATEMENT  OF  ASSETS  AND  LIABILITIES. 


Available  Cash   

Capital  Stock   

Stocks,  Bonds,  etc.,  Market 
Value 

Borrowed  or  due  on  Stocks, 

Real  Estate,  consisting  of 

Borrowed    or    due    on    Real 

Estate 

Plant,  consisting  of  

Incumbrance  on  plant  

Stock  of  Supplies  

Notes  Receivable  
Accounts  Receivable  

Notes  Payable  
Accounts  Payable 

Other  Assets 

TOTAL  ASSETS  

TOTAL  LIABILITIES  

13.  Give  the  names  and  addresses  of  four  or  more  persons  or 
corporations  who  are  acquainted  with  the  business  methods  of  the 
company.  Name.  Profession  or  trade.  Postal  ad- 

dress  in   full,    street   and   number   in    cities.      (Please    write   names 
and   addresses   distinctly.) 

.certify  that  the  answers  given  to  the  foregoing  interroga- 
tories are  true ;  and  in  consideration  of  the  company  con- 
senting or  agreeing  to  execute  or  guarantee  the  bond  herein  applied 
for,  the  does  hereby  covenant,  promise  and  agree  to  pay  the 
premium  or  fees  herein  agreed  upon,  viz.  :  dollars  per  annum 
in  advance ;  and  to  indemnify  and  to  keep  indemnified,  the  said 
company  from  and  against  any  and  all  loss,  costs,  charges,  suits, 
damages,  counsel  fees  and  expenses  of  whatever  nature  or  kind  which 
said  .company  shall  or  may,  for  any  cause,  at  any  time,  sustain 
or  incur,  or  be  put  to,  for  or  by  reason  or  in  consequence  of  said 
company  having  entered  into  or  executed  said  bond. 

In    testimony    whereof,  has    caused    this    application    to    be 

signed    by    its  and    its    corporate    seal    to    be    hereunto    affixed 

this  day   of  ,    A.    D.    19 

( Attest : )  ( Signature. ) 

226 


FIDELITY  INSURANCE   AND   COBPOBATE   SUBETYSHIP. 

SAMPLE  APPLICATION  FORM  FOR  DEPOSITORY 
BOND. 

APPLICATION   FOR   BOND   BY   A   BANK   OB  TRUST   COMPANY. 
1.  Exact  corporate  title  .  2.  Date  of  incorporation 

In    what    State  .  3.    Address  .  4.    Penalty    of 

bond  .  5.   To  whom  given — obligee  .  6.   Date 

from  which  bond   is   required  Give   bond   form  required 

7.  By  what  authority  is  bank  designated?      (i.  e.,  by  what  law  or 
other  provisions — Give  copy  of  such  law  or  other  provision.) 

8.  Who   is  directed  to  execute   this   authority,   and  what  form  does 
its  execution  take?      (i.  e.,  by  resolution,  order,  etc.     Furnish  copy 
of    such    resolution    or   order,    passed    in    this    case.)  .  9. 
Term  of  designation?              .              10.   Is  interest  paid  on   this  de- 
posit?             To   whom    credited?              Rate              .              11.    Attach 
hereto   a   true   financial    statement   of   said   bank   or   trust   company, 
showing  its  resources  and  liabilities,  on  the  day  preceding  the  date 
of  this   application,  and  also  a  copy  of  the  last  published  financial 
statement  of  such  bank  or  trust  company.     (N.  B.  If  there  are  any 
'<  Overdrafts  "    advise    whether    secured    or    unsecured.      Give    par- 
ticulars.)             .              12.  Are  the  stockholders  only  liable  for  their 
subscription,  or  for  double  their  subscription?              .              13.  When 
was  the  last  examination  made  by  national  or  State  bank  examiner? 

14.    By   whom    are    the    loans   of    the    bank    or    trust 
company   directly   authorized? 

.certify  that  the  answers  given  to  the  foregoing  interroga- 
tories, are  true ;  and  in  consideration  of  the  company  con- 
senting or  agreeing  to  execute  or  guarantee  the  bond  herein  applied 
for,  the  (insert  the  name  of  bank  or  trust  company)  does 
hereby  covenant,  promise  and  agree  to  pay  the  premium  or  fees 
herein  agreed  upon,  viz.  :  dollars  ($  )  per  annum,  in 
advance ;  and  to  indemnify,  and  keep  indemnified,  the  said  com- 
pany from  and  against  any  and  all  loss,  costs,  charges,  suits,  dam- 
ages, counsel  fees  and  expenses  of  whatever  nature  or  kind  which 
said  company  shall  or  may,  for  any  cause,  at  any  time,  sustain 
or  incur,  or  be  put  to,  for,  or  by  reason  or  in  consequence  of  said 
company  having  entered  into  or  executed  said  bond. 

The  acceptance  of  this  agreement,  and  of  the  depository's  agree- 
ment to  pay  premiums  for  the  execution  of  said  bond,  or  the 
acceptance  at  any  time  by  the  company  of  other  security,  shall 
not  in  any  way  abridge  or  limit  the  right  of  the  company  to 
be  subrogated  to  any  right  or  remedy,  or  limit  any  right  or  remedy 
which  the  company  might  otherwise  have,  acquire,  exercise  or 
enforce,  and  the  company  shall  have  every  right  and  remedy  which 
an  individual  surety  acting  without  .compensation,  would  have. 

In    testimony    whereof  has    caused    this    application    to    be 

signed    by    its  and    its    corporate    seal    to    be   hereunto    affixed 

this  day    of  ,    A.    D.,    19 

( Attest : )  ( Signature. ) 

By  Address 

N.  B. — The  agent  should  ascertain  and  report  fully  when  sending 
in  application  on  the  following  facts :  a,  6,  c,  d,* 

*  The  questions  a,  b,  c,  and  d,  which  are  as  follows:  (a)  Politi- 
cal affiliations,  (b)  Loans  to  officers  and  directors,  (c)  Financial 
and  business  standing  of  directors,  (d)  Financial  strength  of  largest 
stockholders  will  be  asked  confidentially  of  the  agent  by  the  home 
office,  and  should  be  forwarded  with  the  application. 

227 


FIDELITY    INSURANCE   AND    CORPORATE    SURETYSHIP. 

SAMPLE  BOND  FORM  USED  IN  "PROMPT  PAY- 
MENT"  DEPOSITORY   BONDS. 

Know  all  men  by  these  presents,  that  (hereinafter  called 

the  "  principal  "),  as  principal,  and  the  company,  a  corpora- 

tion of  the  State  of  (hereinafter  called  the  "surety"),  as 

surety,  are  held  and  firmly  bound  unto  (hereinafter  called 

the  "obligee"),  in  the  sum  of  ($  ),  for  the  payment 

whereof  said  principal  and  said  surety  bind  themselves  and  their 
successors  and  assigns,  jointly  and  severally,  firmly  by  these 
presents ; 

Whereas.  now  therefore,  the  condition  of  this  obligation 

is  such,  that  if  the  principal  (state  conditions.) 

It  is  agreed  that  the  following  shall  be  conditions  precedent  to 
any  liability  hereunder : 

First:  That  in  the  event  of  any  default  on  the  part  of  the 
principal,  written  notice  thereof,  with  verified  statement  of  the 
facts  showing  such  default  and  the  date  thereof,  shall  within  ten 
days  after  such  default,  be  delivered  to  the  surety  at  its  office, 
in 

Second :  That  the  surety  shall  not  be  liable  for  any  deposits 
made  after  any  such  defaults. 

Third :  In  the  event  of  loss,  the  obligee  shall,  before  payment 
by  the  surety,  grant  unto  the  surety  a  full,  complete  and  clear 
title  to  all  the  dividends  on  such  a  portion  of  the  total  amount 
on  deposit  with  said  principal,  as  will  equal  the  amount  of  the 
surety's  liability  hereunder. 

Fourth  :  That  no  suit,  action  or  proceeding  shall  be  brought,  or 
instituted,  against  the  surety  upon,  or  by  reason  of,  any  default 
of  the  principal  after  the  expiration  of  thirty  days  aJfter  such 
default,  or,  in  any  event,  after  the  day  of  ,  A.  D.,  19 

Fifth :  That  the  surety  shall  have  the  right  to  terminate  its 
suretyship  under  this  obligation  by  serving  notice  of  its  election 
so  to  do,  upon  said  obligee  or  his,  or  its  lawful  representatives, 
and  thereupon  the  said  surety  shall  be  discharged  from  any  and 
all  liability  hereunder  for  any  default  of  the  principal  occurring 
after  the  expiration  of  five  days  after  the  service  of  such  notice. 

Sixth :  That  the  surety  shall  only  be  liable  hereunder  for  such 
proportion  of  the  total  loss  sustained  by  the  obligee  for  any  failure 
or  neglect  of  the  principal  embraced  within  the  terms  of  this  bond 
as  the  penalty  of  this  bond  shall  bear  to  the  total  amount  of  bonds, 
furnished  by  the  said  principal  in  favor  of  the  obligee,  and  in 
no  event  shall  the  surety  be  liable  hereunder  for  any  sum  in 
excess  of  the  penalty  of  this  bond. 

This  obligation  may  be  continued  for  any  subsequent  period  by 
continuation  certificates,  signed  by  the  president  or  one  of  the 
vice-presidents  of  the  surety,  and  under  its  corporate  seal,  attested 
by  its  secretary,  or  one  of  its  assistant  secretaries. 

Signed   and    sealed,    this  day   of  ,    A.    D.,    19 

(Attest:)  (Signature.) 


SAMPLE    BOND    FORM    USED    IN    "DEFERRED 
PAYMENT"  DEPOSITORY  BONDS. 

This    bond    made    this  day    of  in    the    year    of    our 

Lord  one  thousand  nine  hundred   and 
WItnesseth : 

228 


FIDELITY   INSURANCE   AND   CORPORATE   SURETYSHIP. 

Whereas,  ,of  hereinafter  called  the  "  assured,,"  has 

opened  a  deposit  account  in  the  name  of  with  the  here- 

inafter called  the  "bank;" 

Now,  therefore,  in  consideration,  and  on  condition,  of  the  pay- 
ment of  dollars  ($  )  per  annum  as  a  premium,  the 
company,  of  ,  ,  hereinafter  called  the  V  com- 
pany," does  hereby  agree  that  it  will,  subject  to  the  following 
conditions,  pay  the  assured  for  any  loss  not  exceeding  dol- 
lars ($  ),  which  said  assured  may  sustain  by  reason  of  said 
bank  becoming  bankrupt  or  insolvent,  or  going  into  the  hands  of 
receiver ;  which  loss  said  company  agrees  to  pay  after  the  final 
distribution  shall  be  made  of  the  assets  of  said  bank  and  within 
ten  days  after  said  assured  shall  have  received  his  final  dividend 
therefrom,  and  shall  have  filed  proper  proof  of  loss  with  the  com- 
pany on  its  forms  at  its  home  office  in  , 

This  bond  is  executed  and  accepted  subject  to  the  following 
conditions : 

First :  This  bond  may  be  cancelled  by  the  company  at  any  time, 
and  the  company's  liability  hereunder  shall  cease  immediately  five 
days  from  the  date  of  notice  given  to  the  assured  by  the  company 
of  its  desire  to  withdraw  therefrom,  which  notice  shall  be  delivered 
in  person,  or  by  registered  letter,  to  the  assured  at  the  address 
given  herein. 

Second :  On  the  discovery  of  any  default  on  the  part  of  the 
bank,  the  assured  shall  give  immediate  written  notice  thereof,  with 
the  fullest  information  obtainable  at  the  time,  to  the  company  at 
its  home  office  in  ,  .  Affirmative  proof  of  loss  under 

oath,  together  with  full  particulars  of  such  loss,  shall  be  filed 
with  the  company  at  its  home  office  in  ,  ,  within  three 

months  after  such  discovery,  and  unless  such  affirmative  proof  of 
loss,  under  oath,  together  with  full  particulars  of  such 
loss,  shall  be  filed  with  the  company  at  its  home  office,  , 

,  within  three  months  after  such  discovery,  and  unless  the 
other  conditions  of  this  bond  are  complied  with  by  the  assured, 
this  bond  shall  be  void. 

Third:  In  the  event  of  loss,  the  company  shall,  before  payment, 
have  granted  unto  it  by  the  assured,  a  full,  complete  and  clear 
title  by  assignment  (together  with  warrant  against  adverse  claim 
by  any  third  party)  of  such  proportion  of  the  assured's  claim 
against  said  bank,  as  the  amount  of  the  company's  liability  here- 
under bears  to  the  total  deposit  in  said  bank. 

Fourth :  If  at  any  time  the  deposit  exceeds  the  penalty  of  this 
bond,  and  additional  bonds  shall  not  have  been  required  and  fur- 
nished on  behalf  of  the  bank  covering  such  excess,  the  company 
shall  be  liable  hereunder  for  such  proportion  only  of  this  bond, 
as  the  total  sum  of  all  good  and  valid  bonds  held  by  the  assured 
bears  to  the  total  amount  of  such  deposit. 

Fifth :  The  company  shall  be  liable  hereunder  for  such  propor- 
tion only  of  the  total  loss  sustained,  as  the  penalty  of  this  bond 
bears  to  the  total  sum  of  all  bonds  and  security  furnished  on  behalf 
of  said  bank,  whether  such  bonds  or  security  be  valid  or  not, 
whether  or  not  the  assured  be  able  to  reimburse  itself  from  such 
bonds  or  security,  but  in  no  event  shall  the  company  be  liable 
for  an  amount  in  excess  of  the  penalty  of  this  bond. 

Sixth :  It  is  agreed  between  the  company  and  the  assured  that 
legal  proceedings  for  recovery  hereunder  shall  not  be  brought  until 
three  months  after  said  assured  shall  have  received  his  final  divi- 
dend and  filed  proper  proof  of  loss  with  the  company  at  its  home 
office  as  aforesaid,  and  shall  not  be  brought  at  all  unless  begun 

229 


FIDELITY   INSURANCE    AND    CORPORATE    SURETYSHIP. 


within  twelve  months  from  the  time  said  assured  shall  have  re- 
ceived his  final  dividend  as  aforesaid. 

Seventh :  In  the  event  of  loss,  and  the  assured  being  indebted 
to  said  bank,  the  company  may  exercise  the  option  of  liquidating 
such  indebtedness  or  any  part  thereof,  and  of  turning  over  the 
evidence  of  such  liquidation  to  the  assured  as  a  credit  against  the 
company's  liability  hereunder. 

Eighth :  Any  erasure  or  change  appearing  on  the  face  of  this 
bond  as  originally  printed,  or  any  change  or  waiver  of  any  of 
its  terms  or  conditions  or  statements,  shall  be  invalid  unless  en- 
dorsed hereon  and  signed  by  the  president,  or  a  vice-president,  and 
attested  by  the  secretary  or  one  of  the  assistant  secretaries  of  the 
company.  Notice  given  to,  or  the  knowledge  of  any  agent  or 
any  other  person,  whether  received  or  acquired  before  or  after  the 
date  of  this  bond,  shall  not  be  held  to  waive  any  of  the  terms 
or  .conditions  hereof,  or  to  preclude  the  company  from  asserting 
any  defense  under  the  said  terms  and  conditions,  unless  assented 
to  in  writing  and  signed  by  the  president,  or  a  vice-president,  and 
attested  by  the  secretary  or  one  of  the  assistant  secretaries  of  the 
company. 

In  witness  whereof  the  company  has  caused  this  bond  to 

be  signed  by  its  president  and  attested  by  its  secretary 

and  its  corporate  seal  to  be  affixed  hereto,  the  day  and  year  first 
above  written. 

(Attest:)  (Signature.) 

SAMPLE  FORM  OF  GENERAL  INDEMNITY  BOND 
PROTECTING  SURETY. 

This  agreement  witnesseth :  That,  whereas,  we  the  undersigned 
have  requested  the  company,  a  corporation  under  the  laws 

of  the  State  of  (hereinafter  called  the  company),  to  sign  and 

execute  a  certain  bond  or  undertaking  reference  to  which 

bond  or  undertaking  is  hereby  made  for  the  purpose  of  certainty 
and  a  copy  of  which  instrument  is  or  may  be  hereto  attached ;  and 

Whereas,  the  company  has  signed  and  executed,  or  is  about  to 
sign  and  execute,  the  said  instrument  upon  condition  of  the  execu- 
tion and  delivery  hereof  and  upon  the  security  and  indemnity  hereby 
and  herein  provided. 

Now,  therefore,  in  consideration  of  the  premises  and  of  the  sum 
of  one  dollar  in  hand  paid  to  us  by  the  company,  the  receipt 
whereof  is  hereby  acknowledged,  we,  the  undersigned,  hereby  cove- 
nant and  agree  with  the  company,  its  successors  and  assigns,  in 
manner  following : 

First :  That  we  will  pay  in  cash  to  the  company,  at  its  principal 
offices  in  the  city  of  ,  ,  for  the  execution  of  the  said 

instrument,  the  annual  premium  or  charge  of  dollars,  to  be 

paid  annually  in  advance  on  the  -  day  of  in  each  and 

every  year  during  the  time  the  company  shall  be  and  continue  liable 
upon  the  said  instrument,  and  until  the  company  shall  have  been 
fully  discharged  and  released  from  any  and  all  liability  upon  the 
said  instrument,  and  all  matters  arising  therefrom,  and  until  there 
shall  have  been  furnished  to  the  company,  at  its  principal  offices 
in  the  .city  of  ,  ,  due  and  satisfactory  proof,  by  evi- 

dence legally  competent,  of  such  discharge  and  release. 

Second  :  That  we  will  at  all  times  indemnify  and  keep  indemnified 
the  company,  and  hold  and  save  it  harmless  from  and  against  any 

230 


FIDELITY   INSURANCE    AND    CORPORATE    SURETYSHIP. 

and  all  demands,  liabilities  and  expenses  of  whatsoever  kind  or 
nature,  including  counsel  and  attorneys'  fees,  which  it  shall  at 
any  time  sustain  or  incur  by  reason  or  in  consequence  of  having 
executed  the  said  instrument ;  and  that  we  will  pay  over,  reim- 
burse and  make  good  to  the  company,  its  successors  and  assigns, 
all  sums  and  amounts  of  money  which  the  company  or  its  repre- 
sentatives shall  pay  or  cause  to  be  paid  or  become  liable  to  pay, 
under  its  obligation  upon  said  instrument,  or  as  charges  and  ex- 
penses of  whatsoever  kind  or  nature,  including  counsel  and  attor- 
neys' fees,  by  reason  of  the  execution  thereof,  or  in  connection 
with  any  litigation,  investigation  or  other  matters  connected  there- 
with, such  payment  to  be  made  to  the  .company  as  soon  as  it  shall 
have  become  liable  therefor,  whether  it  shall  have  paid  out  said 
sum  or  any  part  thereof  or  not. 

That  in  any  settlement  between  us  and  the  company  the  vouchers 
or  other  proper  evidence  showing  payment  by  the  company  of  any 
such  loss,  damage  or  expense,  shall  be  prima  facie  evidence  against 
us  of  the  fact  and  amount  of  our  liability  to  the  company,  pro- 
vided that  such  payment  shall  have  been  made  by  the  company 
in  good  faith,  believing  that  it  was  liable  therefor. 

Third :  That  in  case  any  action  at  law,  suit  in  equity,  or  other 
proceeding  be  commenced  or  notice  of  such  action,  suit  or  proceed- 
ing be  served  upon  the  undersigned,  affecting  the  liability  of  the 
company  upon  said  instrument,  or  growing  out  of  any  matter  con- 
nected herewith,  or  on  account  of  which  the  said  instrument  was 
given,  we  will  immediately  so  notify  the  company  at  its  principal 
offices  in  the  city  of 

Fourth :  The  company  may  at  any  time  hereafter  take  such 
steps  as  it  may  deem  necessary  or  proper  to  obtain  its  release 
from  any  and  all  liability  under  the  said  instrument,  or  under  any 
other  instrument  within  the  meaning  of  section  fifth  hereof,  and  to 
secure  and  further  indemnify  itself  against  loss,  and  all  damages 
and  expense  which  the  company  may  sustain  or  incur  or  be  put 
to  in  obtaining  such  release,  or  in  further  securing  itself  against 
loss,  shall  be  borne  and  paid  by  us. 

Fifth :  That  no  act  or  omission  of  the  company  in  modifying, 
amending,  limiting  or  extending  the  instrument  so  execated  by  the 
company  shall  in  any  way  affect  our  liability  hereunder,  nor  shall 
we  or  any  of  us  be  released  from  this  obligation  by  reason  thereof ; 
and  we  agree  thai  the  company  may  alter,  change,  or  modify, 
amend,  limit  or  extend  said  instrument  and  may  execute  renewal 
thereof,  or  other  and  new  obligations  in  its  place  or  in  lieu  thereof, 
and  without  notice  to  us,  notice  being  expressly  waived,  and  in 
any  such  case,  we  and  each  of  us  shall  be  liable  to  the  company 
as  fully  and  to  the  same  extent  on  account  of  any  such  altered, 
changed,  modified,  amended,  limited  or  extended  instrument,  or 
such  renewals  thereof,  or  other  or  new  obligations  in  its  place  or 
in  lieu  thereof,  whenever  and  as  often  as  made,  as  fully  as  if 
such  instrument  were  described  at  length  herein. 

Sixth :  That  it  shall  not  be  necessary  for  the  company  to  give 
us,  or  either  of  us,  notice  of  any  act,  fact  or  information  coming 
to  the  notice  or  knowledge  of  the  company  concerning  or  affecting 
its  rights  or  liability  under  any  such  instruments  by  it  so  executed, 
or  our  rights  or  liabilities  hereunder,  notice  of  all  such  being 
hereby  expressly  waived. 

Seventh :  That  this  agreement  shall  bind  not  only  the  under- 
signed jointly  and  severally,  but  also  our  respective  heirs,  execu- 
tors, administrators,  successors  and  assigns  (as  the  case  may  be), 

231 


FIDELITY   INSURANCE  AND   CORPORATE   SURETYSHIP. 


until  the  .company  shall  have  executed  a  release  under  its  corporate 
seal,  attested  by  the  signatures  of  its  officers  proper  for  the  purpose. 

Eighth :  That  these  covenants  as  also  all  collateral  securities  or 
indemnity,  if  any,  at  any  time  deposited  with  or  available  to  the 
company  concerning  any  bond  or  undertaking  executed  for  or  at 
the  instance  of  us,  or  any  of  us,  shall,  at  the  option  of  the  com- 
pany, be  available  in  its  behalf  and  for  its  benefit  and  relief  as 
well  concerning  any  or  all  former  or  subsequent  bonds  or  under- 
takings executed  for  us,  or  at  the  instance  of  us,  or  any  of  us, 
as  concerning  the  bond  or  undertaking  such  covenants,  collateral 
securities  or  indemnity  shall  have  been  made,  deposited  or  given. 

Ninth : 

In  testimony  whereof,  we  have  hereunto'  set  our  hands  and  affixed 
our  seals  this  day  of  ,  19 

Signed,    sealed    and    delivered   in    the   presence   of 

(Signature.) 
State    of  ,    county    of  ,    ss. : 

On    this  day    of  ,    19       ,    before   me   personally   came 

to    me    known    and    known    to    me    to    be    the    individual 
described  in   and  who  executed  the  foregoing  agreement,   and 
acknowledged  that  executed   the  same. 

State    of  ,    county    of  ,    ss. : 

On   the  day   of  ,   in   the   year   19       ,   before   me   per- 

sonally came  ;   to  me  known,   who   being  by  me  duly  sworn, 

did  depose  and  say :   that  he  resides  in  that  he  is  the 

of   the  the    corporation   described    in    and   which    executed   the 

foregoing  instrument;  that  he  knows  the  seal  of  the  said  corpora- 
tion; that  the  seal  affixed  to  the  said  instrument  is  such  corporate 
seal ;  that  it  was  so  affixed  by  order  of  the  board  of  directors  of 
the  said  corporation,  and  that  he  signed  his  name  to  the  said  in- 
strument by  like  order. 

(Signature.) 


232 


INDEX 


PAGE 

Act  of  God    60 

Administrators,  Bonds  of   84-89 

Administrator,  Money  advanced  by,  Bond  for 101 

Adulterated  Butter,  Bond  for  Manufacture  of 132 

Adulterated   Drugs,   Bond  for,   Exportation  of 135 

Affidavit  in  Bonds  Covering  Lost  Instruments 97 

Agent, 

Application,  Form  used  for 176-179 

Bond  of,  To  Produce  Declaration  of  Owner  to  Invoice  and 

Entry   134 

Commission   (see  Fidelity  Risks,   Classification  of) 21 

Disbursing,  U.  S.  Treasury  Department,  Bond  for 117 

Employment,  Bond  for 142 

Employers'    Statement   used   for 180 

Familiar   Hints   to,    or   "  Dont's  " 170^175 

Indian    (Interior   Department),    Bond    for 123 

Pension    (Interior    Department),    Bond    for 123 

Salary,  on    (see  Fidelity   Risks,   Classification  of) 20-21 

Special    (Interior  Department)    Bond  for 123 

Special  Disbursing  (Interior  Department),  Geological  Sur- 
vey,   Bonds   for    123 

Special  Disbursing  (Department  of  Commerce  and  Labor), 

Bonds   for   124 

Temporary  Disbursing  (Department  of  Agriculture),  Bonds 

for    123-124 

Agents'  Office  Organization 165-167 

Collection   of  Premiums    166-167 

Filing  System,   etc 165-166 

Index  System   166 

Organization   of   Territory    167 

Promptness    in    Correspondence    166 

Agreement, 

Indemnity,  Contract  Constructural  Bonds 54 

Indemnity,   Judicial   Bonds 88-89,  92 

Indemnity,  Official  Bonds   112-113 

Of  Parties  to  Cancel,  Contract,  Constructural   Bonds 65 


INDEX 

PAGE 

Agriculture,  Department  of,  Bonds  for  Employees  of 123-124 

Alcohol,    Denatured,    Bond    for 132 

Withdrawal   of,    Free   from   Tax,    Bond   for   Scientific   Pur- 
poses,  Bond  for   131-132 

Alteration,    Bond   for   Replacing   Property    after 78 

Alterations,  Contract  Constructural   Bonds   60 

American   Bankers'   Association 

Bank    Bond,    forms    44-46 

Standard  Bank   Fidelity    Bond,    Form  of 199-204 

American    Products,    Bond   to   Produce,    Certificate    of   Exporta- 
tion   of    135 

Amusement  Enterprises   (see  Fidelity  Risks,  Classification  of).      32 

Analysis  of  Risks    7 

Animals   for    Exhibition,    Bond   for   Importation   of 136 

Annual  Distillers'  Bond   127 

Annual  Warehousing  Bond,  Distillers    131 

Appeal    Bond    92 

Release  of   95 

Appeals,  Circuit  Court  of,   Bonds  for  Clerks   of 119 

Application, 

Fidelity    (see  Fidelity  Application) 14-15 

Form,   Bonds  of   Indemnity    218-220 

Bond  for  Beneficial  Orders,  etc.,  less  than  $1,000.    182-183 
for  Beneficial  Orders,  etc.,  more  than  $1,000.    183-185 

Contract   Bonds    204-207 

County   and    State   Officials   Bonds 220-222 

Court  Proceedings    217-218 

Depository   Bonds    227 

General  Employees,  Agents,   etc 176-179 

Judicial   Cases,  "  short  and  long  term  "   Trusts.  .    213-217 

Lost    Instruments     218-220 

Miscellaneous  Bonds    225-226 

Fidelity   Cases    185-187 

U.   S.   Government  Officials  Bonds .  .  . 222 

U.     S.     Internal     Rev.     Distillers     and     Warehousing 

Bonds     224-225 

U.  S.  Internal  Rev.,  Tobacco  and  Cigar  Manufacturers' 

Bond     223-224 

Officials'    Bonds    109-112 

"  Long  Term  "   Trusts,   Inquiries   on 90-91 

"  Short  Term  "  Trusts,  Inquiries  on 85-89 

Appraisers,   General    (Customs),    Bonds   for 117 

Art  of   Soliciting    167-169 

Art,  Bond  for  Exhibition  of  Works  of 136 

Articles   Imported,   Bond   for   Re-delivery   of 136 

234 


INDEX 

PAGE 

Assay  Officers,    Bonds  for    117 

Assignees,   Bonds   of 84-89 

Inquiries   on   Application    to 87-88 

Assistant,  Commissaries  of  Subsistence  (War  Dept.),  Bond  of.  118-119 

Paymaster   ( Navy   Dept. ) ,   Bond  of 122 

passed   (Navy  Dept),  Bond  of 122 

General   (War   Dept.),    Bond  of 118 

Quartermaster  (Marine  Corps,  Navy  Dept),  Bond  of 122 

Treasurers,    U.    S.    Treasury   Dept.,    Bonds   of 117 

Attachment : 

Bond 92 

Bond,  Release  of   95 

Attorneys    85-86,     90 

Auctioneers'    Bonds    142 

Authors'    System   of  Classification   of   Surety   Business 8 

Average  Basis  in  Underwriting  as  Applied  to  Suretyship 7 

B. 

Bail  Bonds    93 

Release   of    95 

Bank  (see  Fidelity  Risks,  Classification  of)  : 

Basis   in   Underwriting   Risks    7 

Employees,  Employers'  Statement,  used  for 181-182 

Fidelity     Bond      (American     Bankers'     Asso.),      Standard 

Form 199-204 

Bond,    Individual   Fidelity,    Form  of 194-196 

Bonds,  Forms  of  (see  Fidelity,  Bond  Forms) 44-46 

Fidelity,   Schedule  Bond,   Form  of 197-199 

Book,  Lost,  Bond  for 99 

Banks    86 

Basement   Stairway    Bond    146 

Beneficial   Orders,   Application,    form   of 182-185 

Bid  or  Proposal  Bonds 81-82 

Hazardous    81-82 

Investigation  of   82 

Reason  for    81-82 

When   Required    82 

Bidder    81-82 

Bill   Board  Bond    146 

Board,    Bill,    Bond    for 146 

Bodies,  Public,  Bond  for  Guaranteeing  Franchises  to,   etc 146 

Boiler,   Bond  for    145 

Bonds : 

Bail    93 

Bid   or  Proposal    81-82 

235 


INDEX 

Bonds — continued.  PAGE 

Contract      Constructural       (see      Contract      Constructural 

Bonds)    47-66 

Fidelity  ( see  Fidelity  Bonds)    9-46 

Given    for    Municipal    or    Excise    Licenses,    in    Compliance 

with  Local  Laws   140-147 

Given  by  U.   S.   Govt.   Officials  and  Employees    (see  U.   S. 

Govt.  Officials  and  Employees,  Bonds  of) 114-124 

Guaranteeing    Honesty    of    Principal 7 

Solvency  of  Depositories   (see  Depository  Bonds).  148-154 
Internal  Revenue  and  Customs  for  U.  S.  Government  (see 
Internal  Rev.  and  Customs  Bonds  for  U.  S.  Govt.)..    125-139 

Judicial 83-95 

Libel 93 

Maintenance 67-69 

Miscellaneous  Contract 72-80 

Miscellaneous  Indemnity 96-102 

On   Behalf  of   State,    County    and   Municipal   Officials   (see 

Official  Bonds)    103-113 

Recognizances 93 

Required    of   Principal 7 

Supply 70-71 

Underlying  Principle  in  writing  Fidelity  and  Surety  Bonds.        7 

Unregistered,  Lost,  Bond  for 99 

Bond  Book,  for  U.  S.  Customs  Bonds 138 

Bond   Forms  : 

American   Bankers  Association,   Clauses   in 44-46 

Beneficial  Orders,  Application,  Forms  for 182-185 

Blanket  Bond  (see  Fidelity  Bond  Forms) 33-34 

Contract  Constructural,  Consideration  of  Provisions  in .  .    55-64 

Fidelity  (see  Fidelity,  Bond  Forms) 33-43 

Form,  Bank,  Used  by  Companies,  Clauses  in 44-46 

Judicial 93 

Miscellaneous   Indemnity    102 

Official  Bonds   113 

Books,   School,   Bond  for  Furnishing 76 

Bookkeepers,  Bond  for  (see  Fidelity  Risks,  Classification  of).  26-27 

Brandy,   Fruit,   Transportation  and  Warehouse  bond   for 129 

Breach  of  Contract  Constructural  Bond  by  Assured  as  a  Means 

of  Cancelling  Bond 65 

Brewers  Bond   126 

Bridges 49-67 

Broker : 

Desirability  of,  in  Executing,  Custom  House  Bonds 139 

Pawn,   Bond  for 141-142 

Ticket,   Bond   for 145 

236 


INDEX 

Building :  PAQB 

Association,    Bonds   for    (see  Fidelity   Risks,    Classification 

o*)    30-31 

Maintenance,  Bond  for 67 

Moving,    Bond  for 143 

Public,    Bond   for   Superintendent  of   Construction   of 117 

Ventilating 49 

Business   Associations,    Bonds   for    (see   Fidelity  Risks,    Classi- 
fication of)    31-32 

Butter : 

Adulterated,  Bond  for  Manufacture  of 132 

Renovated,  Bond  for  Manufacture  of 132 

C. 

Cancellation : 

Or  Release  of  Contract  Constructural  Bonds 64-66 

Judicial  Bonds    93-95 

Carrier,  Common,  Bond  for  Immediate  Transportation  of  Duti- 
able Merchandise 138 

Letter,   Bonds   for 121 

Car    Tracks    on    Streets 68 

Cashiers    (see  Fidelity  Risks,   Classification  of) 18-19 

Certificate  of  Deposit,   Lost,   Bond   for 99 

Certificate    of    Exportation     of    American    Products,    Bond    to 

Produce 135 

Charitable  Associations  (see  Fidelity  Risks,  Classification  of).   31-32 

Checks,  Lost,    Bond  for 99 

Cheese  (Filled)  Manufacture,  Bond  for 131 

Chiefs    of    Parties    in    the    Coast    and    Geodetic    Survey    (Dept. 

of  Commerce  and  Labor,   Bonds  for) 124 

Cigar  Manufacturers  Bond 127-128 

Application   for    223-224 

Circuit  Court  (U.  S.)   of  Appeals,   Bond  for  Clerks  of 119 

Circuit  Court  (U.  S.)   Clerks,  Bonds  for 119 

Civil   Commotion    60 

Claimant  of   Seized   Goods   for   Costs   of   Court,   Bond   for 135 

Classification  : 

Of  Bonds  given  for  Municipal  or  Excise  Licenses 141-147 

Of  Bonds  Guaranteeing  the  Solvency  of  Depositories.  .    149-153 

Of  Internal  Revenue  and  Customs  Bonds 126-138 

Of  Inquiries  from  the  Home  Office 161-164 

1.  Fidelity  Obligations    161 

2.  Contract  Obligations    161-163 

3.  Judicial  Obligations   163 

4.  Public  Official  Obligations 164 

5.  Depository    Obligations 164 

237 


INDEX 
Classification — continued.  PAGE 

Of  Judicial  Bonds 84-93 

Of  Miscellaneous  Contract  Bonds 72-80 

Of  Surety  Business   8 

Difficulty  in   8 

Another  System   . 8 

Clauses  in  Fidelity  Bonds,  Differently  Carried  Out 43 

Clerks  (see  Fidelity  Risks,  Classification  of) 18-19 

Of  Circuit   Courts    (U.    S.)    Bonds    for 119 

Of  Circuit   Courts   of  Appeals   (U.   S.)    Bonds   for 119 

Of  Commerce  Court  (U.  S.)  Bonds  for *  .  . . .    119 

Of  District  Courts    (U.    S.)    Bonds   for 119 

Of  Post  Office,  Bonds  for 120-121 

Railroad,   Postal,    Bonds   for , 121 

Clubs  (see  Fidelity  Risks,  Classification  of) 31 

Coast   and    Geodetic   Survey    (Dept.    of   Commerce   and   Labor), 

Bonds   for    Chiefs    of    Parties    in 124 

Coastwise  Clearing,  Vessel,  Bond  for  Withdrawal  of  Supplies  for  137 

Collectors   (see  Fidelity  Risks,   Classification  of) 20 

Of    Customs,    Bonds   for 117 

Of   Internal   Revenue,   Bonds   for 117 

Deputy  of  Internal  Revenue,  Bonds  for 118 

Tax,   Bonds   for 106 

Collection   of   Premiums 166-167 

Commerce   Court    (U.    S.)    Bonds   for   Clerks   of 119 

Commerce  and  Labor,   Department  of : 

Bonds  for   Employees   of 124 

Commissaries  : 

Assistant,  of  Subsistence   (War  Dept.)   Bonds  for 118-119 

Of  Subsistence   (War  Dept.)    Bonds   for 118-119 

Commissioners : 

Fish,    Bonds    for 106 

Game,  Bonds  for 106 

U.  S.  Shipping  (Dept.  of  Commerce  and  Labor),  Bonds  for  124 

Committees,   Bonds  for 89-92 

Common   Carrier,   Bond  for  Immediate  Transportation  of  Duti- 
able   Merchandise,    for 138 

Concrete    Construction,    Maintenance   Bond   for 67 

Conservators,    Bonds   of 89-92 

Consignee,  Bond  of  to  Produce  Declaration  of  Owner  to  Invoice 

and  Entry   134 

Constables,    Bonds    of 106-107 

Construction : 

Superintendent   of    Public    Buildings,    U.    S.    Treasury    De- 
partment,   Bonds    for 117 

Of  Vessels   73-74 

238 


INDEX 

PAGE 

Constructural,  Contract,  Bonds  Nos.  1  and  2,  Forms  of .  .  .    207-210 

Consuls  : 

Generals,  U.  S.  Bonds  for 116 

Vice  and  Deputy  (U.   S.)   Bonds  for 116 

Consular  Courts   (U.   S.)    Bonds   for  Marshals  of 116 

Contract,    Fulfillment    of 81 

Contract  Bonds : 

Application  for,  Form  of 204-207 

Miscellaneous 72-80 

Contract  Constructural   Bonds 47-66 

Risk  in   '. 47 

Credit  or  Banking  Proposition 47 

Premium,   How  Figured 48 

Advisability  of  Accepting  Risk 48-53 

Good  and  Bad  Risk 48-53 

1.  Nature  of  Work  Contracted  for 49-50 

2.  Can  Work  be   Completed  at  Profit? 50 

3.  Ability  of  Contractor   to   Complete 50-51 

4.  Work  Underway  and  Percentage  Uncompleted 51 

5.  Conditions   of  Payment 51-52 

6.  Financial    Standing    of    Contractor... 52-53 

7.  Age  of  Contractor 53 

Premium  Rate  and  Indemnity  Agreement 54 

Ratio   Observed    in   Execution 54-55 

Issued  in  Favor  of  Federal  and  State  Governments 56 

Bond  Forms    55-64 

1.  Notice 56-57 

2.  Option   to  Complete 57-58 

3.  Limiting    Surety's   Liability 58-59 

4.  Time  of  Last  Payment  and  Reserve 59-60 

5.  Contingencies  Excluded   60 

6.  Changes  and  Alterations 60-61 

7.  No  Guarantee  of  Proficiency,  Wearing  Qualities  and 

Maintenance 61 

8.  Counter  Security  and  Proportionate  Loss 61-62 

9.  Limitation  of  Action 62 

Second    Form,    Indemnifying 62-64 

Cancellation  or   Release 64-66 

No   Such    Clause 64 

How  Cancelled   64 

Methods  of   65-66 

1.  Surrender   of  Obligation 65 

2.  Release   in   Writing 65 

3.  Limitations 65 

4.  Agreement  of  Parties 65 

239 


INDEX 

PAGE 

Contract  Constructural  Bonds — continued. 
Cancellation  or  Release — continued. 
Methods  of — continued. 

5.  Breach  in  Bond  by  Assured 65 

6.  Settlement   of   Claim 66 

Maintenance  and  Provision  in 67 

Nos.  1  and  2,  Forms  of 207-210 

Contract  Obligations  : 

Comparison    with    Bonds    Given    for    Municipal    or    Excise 

Licenses 140-141 

Inquiries  Concerning 161-163 

Contractors : 

Indemnity    Bond 211-213 

Star    Route,    Bonds    for 121 

Convertible   Collateral : 

On   Financial   Guarantee   Bonds 159 

How  Handled   159-160 

Corporate  Suretyship   (see  Suretyship)  : 

Division    by    State    Insurance    Departments 7-8 

Correspondence,     Promptness     in 166 

Costs,   Court,   Bond   of   Claimant  of   Seized   Goods   for 135 

Cotton   Compress    73 

Counter-Security    and    Proportionate    Loss,    Contract    Construc- 
tural Bonds 61-62 

County  Officials  Bond,  Application  Form 220-222 

County  Officials,  Bonds  on  Behalf  of  (see  Officials'  Bonds) .  .    103-113 

County   Treasurers,    Bonds   for 106 

Court,  Circuit  (U.  S.)  Bonds  for  Clerks  of 119 

Circuit  (U.  S.)  of  Appeals,  Bonds  for  Clerks  of 119 

Commerce  (U.  S.)  Bonds  for  Clerks  of 119 

District  (U.   S.)    Bonds   for  Clerks  of 119 

Court  Proceedings : 

Release  of   Bonds   Filed   in 95 

Sample  Application  Used  in 217-218 

Court  Costs,   Bond  of  Claimant  of  Seized  Goods  for 135 

Credit,    Basis   in    Underwriting   Risks 7 

Criminal    Bail    Bonds 93 

Culpable  Negligence    39-40 

Curing  Fish,  Bond  on  Withdrawal  of  Salt  for 136 

Customs : 

Bonds 132-138 

Bonds  for  General  Appraisers  of 117 

Collectors   of,    Bonds   for 117 

Internal  Revenue   Bonds    (see   Internal   Revenue  and   Cus- 
toms Bonds  Given  to  U.  S.  Govt.) 125-139 

240 


INDEX 

Customs — continued.  PAGE 

Internal  Revenue  Laws  and  Regulations 125 

Naval  Officers  of,  Bonds  for 117 

Surveyors  of,  Bonds  for 117 

Custom  House : 

Bond  Forms 138-139 

Broker,   Desirability  of,    in   Custom  House   Bonds 139 

Drayman    and   Lighterman,   Bonds    for 137 

Service 114 

Cyclone 60 

D. 

Dams 49 

Declaration  of  Owner  to  Invoice  and  Entry,  Bond  of  Importer, 

Consignee,    Agent  to   Produce 134 

Deferred  Payment : 

Class    of    Bonds    Guaranteeing    the    Solvency    of    Deposi- 
tories     149,  153 

Depository  Bond,  Form  of 228,  230 

Delivery   of   Unclaimed    Packages : 

Bond  for   134-135 

Bond  for  six  months  for 134 

Denatured  Alcohol,  Bond  for 132 

Department : 

Of  Agriculture,   Bonds  for  employees  of 123-124 

Of  Commerce   and   Labor,    Bonds  for   employees  of .    124 

Of  Interior,  Bonds  for  employees  of 122-123 

Of  Justice,    Bonds   for   employees   of 119 

Of  Justice,  Officials  located  in  Washington,   Bonds  for 119 

Of  Navy,   Bonds  for  employees  of 121-122 

Of  Post  Office,   Bonds   for  employees  of 120-121 

Of  State,    Bonds    for    employees   of 116 

Of  Treasury,  Bonds  for  employees  of 116-118 

Of  War,  Bonds  for  employees  of 118-119 

Depository    Bonds    148-154 

Dangers  in    148 

Classification 149-153 

1st.  Prompt    Payment    Class 149-153 

By   Whom   Required 149-150 

Peculiar   Features   of 150 

Risk 15° 

Financial  Guarantee   151 

Advisability  of  Single  Risks 151-152 

Objections  to  Same 

Co-Insurance  Clause   152-153 

241 


INDEX 

PAGE 

Depository  Bonds^-continued. 
Classification — continued. 

2nd.  Deferred    Payment  Class 149,  153 

Guarantee 149 

Considerations    Before   Execution 149 

Written  on   an  Insurance  Basis 153 

By  Whom  Used 153 

Information  in  Writing  These  Bonds 153-154 

Application   for    227 

Deferred  Payment,   Form  of 228-230 

Prompt  Payment,   Form  of 228 

Depository  Obligations,  Inquiries  Concerning 164 

Deputy : 

Collectors    of    Internal    Revenue,    Bonds    for 118 

Consuls,  Bonds  for 116 

Marshals    (U.   S.),   Bonds    for 119 

Paymaster,  General,  War  Dept.  Bond  for 118 

Disbursing  Agents,  Special : 

Dept.    of    Interior,    Geological    Survey,    Bonds    for 123 

Special,  Dept.  of  Commerce  and  Labor,  Bonds  for 124 

Temporary,  Dept.  of  Agriculture,  Bonds  for 123-124 

U.   S.   Treasury  Department,   Bonds   for 117 

Disbursing  Officers,  Dept.  of  Justice,  Bonds  for 119 

Disbursing  Officers,  Special,  U.  S.  Treasury  Dept.  Bonds  for.  . .    117 
Dishonesty   (see  Fidelity  Bonds)  : 

Form  of  Bond  Protecting  Against,  etc 34-40 

Direct  Export  Bond 133 

Directors,   Pay,  Navy  Dept.   Bonds  for 122 

Distillers : 

Bond,  Application  for 224 

Annual   Bond 126-127 

Annual   Warehousing  Bond 131 

Fruit  Bond   127 

Leaseholders    Bond    126 

Monthly   Warehousing    Bond 128 

Spirits,    Bond    for   Exportation    of 137 

District  Court  (U.  S.)   Clerks,   Bonds  for 119 

Division    of   Corporate   Suretyship   by   State   Insurance   Depart- 
ments    7-8 

Domestic  Spirits,   Bond  for  Exportation  of 136 

"  Don'ts  "  or  Familiar  Hints  to  Agents 170-175 

Drafts,  Lost,  Bond  Covering 99 

Drains 49,  68 

Drain  Layers  Bond 142 

242 


INDEX 

PAGE 

Drawback,    Benefit   of: 

Bonds  on  Export  of  Imported  Merchandise  with 137 

Bonds  for  Export  of  Manufactured  Articles  with 137 

Draymen,  Bond  for 144 

Draymen  and  Lightermen,  Custom  House,  Bond  for 137 

Dredges. 49 

Drivers   (see   Fidelity  Risks,   Classification  of) 21-22 

Drugs,  Adulterated,   Bond  for  Exportation  of 135 

dutiable  Merchandise,   Bond  of  Common  Carrier  for  Immediate 
Transportation .   138 


Electric     Light     Companies    (see     Fidelity     Risks,    Classifica- 
tion of) 28 

Electricians'  Bond   , 144 

Employees : 

Application    Form   Used    for 176-179 

Bank,  Employer's  Statement  Used  for 181-182 

Bonds  From,  Should  be  Required 104-108 

Department  of  Agriculture,  Bonds  for 123-124 

Department  of  Commerce  and  Labor,  Bonds  for 124 

Department  of  the  Interior,  Bonds  for 122-123 

Department  of  Justice,   Bonds  for 119 

Employer's   Statement  Used  for 180 

Furnishing  Bonds  to  U.  S.  Government 116-124 

Navy  Department,   Bonds   for 121-122 

Post  Office  Department,  Bonds  for 120-121 

State   Department,   Bonds   for 116 

Treasury  Department,   Bonds  for 116-118 

U.  S.  Government,  Bonds  for  (see  U.  S.  Govt.  Officials  and 

Employees  Bonds)    114-124 

War  Department,   Bonds  for 118-119 

Employers  : 

Statement,  Fidelity  Bonds . 15-16 

Statement  Used  for  Bank  Employees 181-182 

Statement  Used  for  General  Employers,  Agents,  etc 180 

Embezzlement : 

Form  of  Individual  Fidelity  Bond  Covering 187-189 

Form  of  General  Schedule  Bond  Covering 189-192 

Employment    Agents,    Bond 142 

Enemy,  Public   60 

Engineers,    Stationary,    Bond   for 145 

Entry   and   Invoice,    Bond  of   Importer,   Consignee  or  Agent   to 
Produce  Declaration  of  Owner 134 

Entry  of  Residue  of  Cargo  in  Other  Districts,  Bond  of  Master 

for 133 

243 


INDEX 

PAGE 

Examination    of    Imported    Teas,    Bond    for 137 

Excepted   Liabilities,    Contract   Constructural    Bonds 59 

Excise  Bonds    146-147 

Excise  or  Municipal  Licenses,  Bonds  Given   for,   in  Compliance 
with  Local  Laws  (see  Licenses,  Municipal  or  Excise,  etc.)   140-147 

Executor,  etc.,   Money  advanced  by,  Bond  for 101 

Executors 84-89 

Execution  Ratio  Observed  in  Contract  Constructural  Bonds. .    54-55 
Exhibition  : 

Bond    for   Importation    of   Animals    for 136 

Of  Works  of  Art,  Bond  for 136 

Explosives,    Bond    for    Use    of 143 

Export : 

Bond 136 

Bond  Direct  (Bonded  Manufacturers  Warehouse) 133 

Bonds  for  Spirits,  Liquors  and  Various  Articles 129 

Fermented    Liquor,    Bond   for 130 

Of  Imported   Merchandise  with   Drawback 137 

Of  Manufactured  Articles  with  Drawback 137 

And  Transportation   of  Manufactured   Tobacco,   Bond  for.  .    133 
Exportation  : 

Of  Adulterated   Drugs,   Bond   for 135 

Of  American  Products,  Bond  to  Produce  Certificate  of.  ...    135 

Of  Distilled    Spirits,    Bond   for 137 

Of  Domestic   Spirits,   Bond  for 136 

Of  Repaired  or  Re-Manufactured  Railroad  Iron,  Bond  for.  .    136 

Of  Impure  and  Unwholesome  Tea,  Bond  for 137 

Exporters  of   Oleomargarine,   Bond  for 129 

Express  Companies  ( see  Fidelity  Risks,   Classification  of) ...    27-28 

F. 

Familiar  Hints  to  Agents  or  "  Donts  " 170-175 

Federal    Government,    Contract  Constructural    Bonds   to 56 

Supply   Bonds  for 70 

Fermented  Liquor,  Bond  for  Export  of 130 

Fidelity  Bank  Bond  (Individual),  Form  of 194-196 

Fidelity  Bond,  Bank,  American  Bankers  Assn.,   Standard   Form 

of 199-204 

Different  from  Ofllcials'  Bonds 108-109 

Individual,   Form  of 187-189 

Fidelity  Bonds 5,  7,  8,  9-46 

Straight 5 

Underlying   Principle  in  Writing 7 

Underwritten   on   Straight   Insurance   Basis 7 

What  is 9 

244 


INDEX 
Fidelity  Bonds — continued.  PAGE 

When   Required    9 

Division  of   9-10 

Standards  Applied  to  Fidelity  Risks   (see  Moral  Standard, 

Physical   Standard,  Fidelity  Risk) 10-14 

Application 14,  15 

What   it   Should   Contain 14-15 

Different  Applications,  When  Used 15 

Employers'  Statement   15-16 

What  Necessary  in 16 

Different  Forms,  When  Used 16 

Fidelity  Risks,  Classification  of 16-33 

1.  Mercantile  and  Manufacturing 17-22 

Inside  Employees  18-19 

Officers  and  Managers 18 

Bookkeepers,  Cashiers,  Clerks 18-19 

Clerks  and  Salesmen 19 

Outside  Employees  19-22 

Traveling  Salesmen 19-20 

Collectors 20 

Agents  on  Salary 20-21 

Agents  on  Commission 21 

Drivers 21-22 

2.  Insurance 22-24 

Regular  Lines  22-23 

General  Agents  22-23 

Special  Agents  23 

Local  and  Sub-Agents 23-24 

Industrial  Insurance   23-24 

3.  Banks,  Trust  and  Financial  Institutions 24-26 

Good    Risks    24 

Points   Considered    25-26 

4.  Stock,  Grain  Brokers  and  Private  Bankers 26-27 

5.  Railroads,     Street     Railways,     Transportation     and 

Express  Companies    27-28 

Schedule  Bond  Used 27 

6.  Telegraph   and  Telephone  Companies 28 

7.  Electric  Light,  Heat,  Power,  Water  and  Gas  Co.'s.      28 

8.  Fraternal   Orders    28-29 

Social   or   Beneficial 29 

9.  Labor  Unions    29-30 

Unprofitable    and    Why 30 

10.  Building  and  Loan  Associations 30-31 

11.  Clubs,  Social,  etc 31 

Cautiously  Written    31 

12.  Business    and   Charitable    Associations 31-32 

245 


INDEX 

Fidelity  Bonds — continued.  PAGE 

Fidelity  Risks,  Classification  of — con. 

13.  Amusement    Enterprises    32 

14.  Miscellaneous    Mercantile    32-33 

Bond   Forms    33-43 

Individual    33 

Schedule     33 

Blanket    33-34 

Form  Protecting  Against  Dishonesty  Only 34-39 

Usual    Form    34 

Warranties  Under    35 

Different  from  Common  Law  Form 35 

Clauses   Found   in    36-39 

Termination   by   Claim 36 

Notification    of    Conduct 36 

Proportionate   Loss    37 

Cancellation    37 

Arrest    37 

Limitation   of   Suit 37-38 

Extent    of  Guarantee 38-39 

Form  Covering   More   than   Dishonesty 39-40 

Culpable   Negligence    39-40 

Defined     40 

Form  Covering  Exceptional   Conditions 41-43 

Grain    Elevators    42 

Warehouseman    43 

Clauses  Differently  Carried  Out 43 

Bank    Bond    Forms 44-46 

Differences  Between  Companies'  Form  and  Ameri- 
can   Bankers   Association's   Form 44-46 

Fidelity   Cases,    Miscellaneous : 

Application,    Form    for 185-187 

Fidelity  Obligations: 

Comparison    with    Bonds    Given    for    Municipal    or    Excise 

License,   etc 140-141 

Inquiries    Concerning    161 

Fidelity    Risks,     Classification    of     (At     Length,     see     Fidelity 

Bonds) 16-33 

Fidelity  Schedule  Bond,  Bank,   Forms  of 197-199 

Fiduciaries,    Bonds,    on    Behalf    of 83 

Filing  System   (Agent's  Office) 165-166 

Filled  Cheese,  Manufacturer's  Bond   for 131 

Financial  Institutions   (see  Fidelity  Risks,  Classification  of).    24-26 

Fire 60 

246 


INDEX 

PAGE 

Fire,   Bond   Covering   Instrument   Lost  by 98 

Fish,  Salt,  Bond  on  Withdrawal  of,  for  Curing 136 

Fish   Commissioners,   Bonds  for 106 

Forms,    Contract   Constructural   Bonds : 

Consideration  of  Provisions  in 55-64 

Custom    House    Bond 138-139 

Internal  Revenue  and  Customs  Bond  (U.  S.  Govt.) ....    138-139 

Internal    Revenue    Bonds 138 

Judicial    Bonds    93 

Miscellaneous   Indemnity   Bond 102 

Public  Official  Bonds 113 

Bonds    Given   U.    S.    Govt.    on    Behalf   of   its   Officials    and 

Employees 115 

Forms,   Specimen   176-232 

Applications  Used  for  General  Employees,  Agents,  etc.    176-179 
Employers'  Statement  Used  for  General  Employees,  Agents, 

etc 180 

Employers'  Statement  for  Bank  Employees 181-182 

Application  for  Societies,  Beneficial  Orders,  etc.     For  Sec- 
retaries,   Treasurers,    etc 182-185 

Bond  Less   than   $1,000 182-183 

More  than  $1,000 183-185 

Application  for  Miscellaneous  Fidelity  Cases 185-187 

Individual  Fidelity  Bond,  for  Larceny  or  Embezzlement  for 

Firms  and  Individuals 187-189 

General  Schedule  Bond,  Larceny  or  Embezzlement. . .  .    189-192 

Fraternal  Order  Bond  Covering  Position 192-194 

Individual  Fidelity  Bank  Bond 194-196 

Bank  Fidelity  Schedule  Bond 197-199 

American    Bankers   Association,    Standard     Bank     Fidelity 

Bond 199-204 

Application   for  Contract  Bonds 204-207 

Form  No.  1,  Contract  Constructural  Bond 207-209 

Form  No.  2,  Contract  Constructural  Bond 209-210 

Contractors'    Indemnity    Bond 211-213 

Application    Used    in    Judicial    Cases    for    "  Short    Term " 

Trusts 213-215 

Application    Used    in    Judicial    Cases    for    "  Long    Term " 

Trusts 215-217 

Application  Form  Used  in  Court  Proceedings 217-218 

Application   for  Bonds  of  Indemnity 218-220 

Application   for  County  and   State   Officials 220-222 

Application  Used  for  United  States  Officials 222 

Application    for   United    States    Internal    Revenue    Tobacco 

and  Cigar  Manufacturers'  Bonds 223-224 

247 


INDEX 

Forms,  Specimen — continued.  PAGE 

Application  for  United  States  Internal  Revenue.   Distillers 

and  Warehousing  Bonds 224-225 

Application  for  Miscellaneous  Bonds 225-226 

Application  for  Depository  Bonds 227 

"Prompt    Payment"    Depository    Bonds 228 

"  Deferred  Payment  "  Depository  Bonds 228-230 

General  Indemnity  Bond,  Protecting  Surety 230-232 

Franchises,  Bonds,  for  Guaranteeing  Same  to  Public  Bodies.    75,  146 

Fraternal  Orders 28-29,  42 

Fraternal   Order  Bond : 

Covering  Position,  Form  of 192-194 

Bond  of  Indemnity  for 99 

Freight    Bills,   Bonds   Guaranteeing 77 

Fruit  Brandy,  Transportation  and  Warehouse  Bond  for 129 

Fruit  Distillers   Bond 127 

G. 

Game: 

Commissioners,   Bonds  for 106 

Wardens,  Bonds   for 106 

Garbage,   Removal   of 76 

Gas  Companies   (see  Fidelity   Risks,   Classification  of) 28 

General  Appraisers  (Customs),  Bonds  for 117 

General  Indemnity  Bond,  Protecting  Surety,  Form  of 230-232 

General  Surveyors  (Interior  Dept.),   Bonds  for 123 

Geodetic  Coast  Survey  (Dept.  of  Commerce  and  Labor),  Bonds 

for,   Chiefs  of  Parties  in 124 

Geological    Survey    (Interior    Dept.),    Bonds    for    Special    Dis- 
bursing   Agents    123 

Government   Bond   Forms,    Number 126 

Grain  Brokers   (see  Fidelity  Risks,   Classification  of) 26-27 

Grain  Elevators,  Bond  for 42 

Gangers,    Storekeepers,    Bonds   for 118 

Guarantee : 

By  Internal  Revenue  and  Customs  Bonds,  Given  to  U.   S. 

Government 125-126 

Under    Supply    Bonds 70 

Of    Street    Paving 68 

Guaranteeing : 

Franchises  to  Public  Bodies 75,  146 

Freight  Bills,  Bonds 77 

Payment  of  Rent,  Bonds 77-78 

Solvency  of  Depositories,  Bonds  (see  Depository  Bonds)    148-154 

Warehouse  Receipts    76 

Guardians,    Bonds    of 89-92 

248 


INDEX 

H. 

PAGE 

Hazardous  Risks,  Official  Bonds 106-108 

Heat  Companies    28 

Heating    Buildings     49 

Heating  Plants,  Maintenance  Bonds  for 68 

Hints,  Familiar  to  Agents,  or  "  Donts  " 170-175 

Historical  View  of  Suretyship 5_7 

Hoisting,   Bond  for 144 

"  Holdovers  "  in  Office,  Bonds  of 107-108 

Home  Office,  Importance  of  Answering  Inquiries  from 160-161 

Honesty  Risks    7,  33,  40 

I. 

Importance  of  Answering  Inquiries  from  Home  Office 160-161 

Importation   of  Animals  for   Exhibition,   Bond  for 136 

Imported  Merchandise,  with  Drawback,  Bond  for  Export  of. ....    137 

Imported  Articles,   Bond  for  Re-Delivery  of 136 

Imported  Teas,  Bond  for  Examination  of 137 

Bond  for  Storage  of 137 

Importer,  Bond  of,  on  Packages  not  Designated  for  Examination, 

Delivered  to   Him 134 

Bond  of,  to  Produce  Declaration  of  Owner  to  Invoice  and 

Entry 134 

Impure  and  Unwholesome  Tea,   Bond  for  Exportation  of. .    137-138 

Indemnifying,  Form  of  Contract  Constructural  Bond 62-64 

Indemnity  Agreement,  Contract  Constructural  Bonds 54 

Judicial  Bonds,  "  Long  Term  "  Trusts 92 

"  Short  Term "  Trusts    88-89 

Official  Bonds   112-113 

Indemnity,   Miscellaneous  Bonds 96-102 

Indemnity    Bond,    Contractors 211-213 

For  Landing  Goods,  at  Night 133 

Forms  of  Application  Used  for 218-220 

General,  Protecting  Surety,  Form  of 230-232 

Index  System,  Agent's  Office 166 

Indian  Agents  (Interior  Dept.),   Bonds  of 123 

Individual  Bond  Form  (see  Fidelity  Bond  Forms) 33 

Individual   Fidelity,   Bank   Bond 194-196 

Individual  Fidelity  Bond,  Form  of 187-189 

Industrial  Insurance  (see  Fidelity  Risks,  Classification  of)..    23-24 

Information  Necessary  in  Official  Bonds 109-112 

Information  Required  in  Writing  Bonds  Guaranteeing  the  Sol- 
vency of  Depositories 153-154 

Injunction    Bond    92 

Release   of    95 

249 


INDEX 

PAGE 

Inquiries  from  Home  Office : 

Importance  of  Answering 160-161 

Inside  Employees  (see  Fidelity  Risks,  Classification  of) 18-19 

Instruments  Lost,  Bonds  Covering 96-99 

Inspectors : 

Pay  (Navy  Dept.),  Bonds  for 122 

Post  Office,  Bonds  for 121 

Insurance  (see  Fidelity  Risks,  Classification  of) 22-24 

Basis  in  Underwriting  Risks 7 

Different  from  Suretyship    5-7 

State  Insurance  Departments,  Division  of  Corporate  Surety- 
ship by    7-8 

Interior  Department,  Bonds  for  Employees  of 122-123 

Internal  Revenue,  Collectors,  Bonds  for 117 

Internal  Revenue  and  Customs  Bonds  for  the  U.  S.  Gov't. .    125-139 

Guarantee  by  Bond   125-126 

Liability    126 

Classification  of  Bonds    126-138 

1.  Internal  Revenue  Bonds    126-132 

Distillers  Leaseholders   126 

Brewers 126 

Annual  Distillers 126-127 

Fruit  Distillers    127 

Tobacco  Manufacturers 127 

Cigar  Manufacturers   127-128 

Distillers  Monthly  Warehousing 128 

Tobacco  Peddler 128 

Oleomargarine  Manufacturers    129 

Exporters  of  Oleomargarine 129 

Other   Export  Bonds 129 

Direct  Export  Distilled  Spirits 129 

For     Transportation     for     Export,     Distilled 

Spirits   129 

Export  of  Fermented  Liquors 129 

For  Removal  for  Export,  Various  Articles...    129 
Transportation  and  Warehouse  for  Fruit  Brandy,  129 

Winemakers    129-130 

Export  for  Fermented  Liquors 130 

•    ».   •  Smoking   Opium   Manufacturer 130 

Transportation      from      Warehouse      to      General 

Bonded   Warehouse    130-131 

Distillers  Annual  Warehousing   131 

Filled   Cheese   Manufacturer    131 

Withdrawal  of  Alcohol  Free  of  Tax  for  Scientific 
Purposes    131-132 

250 


INDEX 

PAGE 

Internal  Revenue  and  Customs  Bonds  for  the  U.  S.  Gov't— con- 
tinued. 
Classification  of  Bonds — continued. 

Manufacturer  of  Adulterated  Butter '.    132 

Manufacturer  of  Renovated  Butter 132 

Denatured   Alcohol    132 

2.  Customs   Bonds    132-138 

Manufacturers  Bond   132-133 

Transfer    132 

Direct     Export      Bond      (Bonded     Manufacturers 

Warehouse)     133 

Bond    for    Transportation    and   Export    of    Manu- 
factured Tobacco   133 

Bond  for  Vessel  Proceedings  with  Cargo  Destined 

for  Foreign  Port 133 

Bond  of  Maker  for  Due  Entry  of  Residue  of  Cargo 

in  other  District    133 

Bond    of    Indemnity    Upon    Obtaining    Permit    to 

Load  Goods  at  Night 133 

Bond  When  Triplicate  Invoice  is  Wanting.  .  .    133-134 

Bond  to  Produce  Verified  Invoice 134 

Bond  of  Importer,  Consignee  or  Agent,  to  Produce 

Declaration  of  Carrier  to  Invoice  or  Entry.  .  . .    134 
Bond  of  Importer  on  Delivery  to  Him  of  Packages 

not   Designated  for   Examination 134 

Bond  for  Six  Months  for  Delivery  of  Unexamined 

Packages    134 

Bond  for  Delivery  of  Unexamined  Packages.  .    134-135 
Bond    to    Produce    Certificate    of    Exportation    of 

American  Products    135 

Bond  for  Exportation  of  Adulterated  Drugs 135 

Bond   of   Claimant  of   Seized   Goods   for   Costs  of 

Court 135 

Warehousing   Bond    135 

Bond  on  Withdrawal  of  Salt  for  Curing  Fish 136 

Transportation  Bond   136 

Bond  for  Re-Delivery  of  Articles  Imported 136 

Bond  for  Exhibition  of  Works  of  Art 136 

Bond  for  Importation  of  Animals   for  Exhibition.  136 

Export  Bonds    136 

Bond   for   Exportation    of   Repaired   or   Re-Manu- 
factured Railroad  Iron   136 

Bond  for   Exportation  of  Domestic  Spirits 136 

Bond    for   Export    of   Imported   Merchandise   with 

Drawback 137 

Bond  for   Export  of  Manufactured   Articles,   with 

Benefit  of  Drawback 137 

251 


INDEX 

PAGE 

Internal  Revenue  and  Customs  Bonds  for  the  U.  S.  Gov't — con- 
tinued. 
Classification  of  Bonds — continued. 

Bond  for  Exportation  of  Distilled  Spirits 137 

Bond  for  Custom  House  Draymen  and  Lightermen  137 
Bond    on    Withdrawal    of    Supplies    for    a    Vessel 

Clearing  Coastwise    137 

Bond  for  Storage  of  Imported  Teas 137 

Bond  for  Examination  of  Imported  Teas 137 

Bond  for  Exportation  of  Impure  and  Unwholesome 

Teas 137-138 

Bond   of  Common   Carrier    for   Immediate   Trans- 
portation of  Dutiable  Merchandise 138 

Bond  Forms    138-139 

1.  Internal   Revenue  Bonds 138 

Provided  by  U.   S.  Govt 138 

2.  Customs   Bonds    138-139 

Bond   Book    138 

Desirability  of  Custom  House  Broker 139 

Suggestions   in  Regard   to  Business 139 

Internal  Revenue  and  Customs  Law  and  Regulations 125 

Internal  Revenue  Deputy  Collectors   of,   Bonds   for 118 

Internal   Revenue    Service 114 

Internal    Revenue,    Tobacco    and    Cigar    Manufacturers'    Bond, 

Application  for 223-224 

Introduction 5-8 

Investigation  of  Applicant  for  Government  Service 115 

Investigation  of  Maintenance  Bonds 68-69 

Investigation  of  Supply   Bonds 70 

Investments   (Fiduciary)    86 

Invoice  and  Entry,  Declaration  of  Owner  to,  Bond  of  Importer, 

Consignee,  or  Agent  to  Produce 134 

Invoice  Verified,  Bond  to  Produce 134 

Iron,  Railroad,   Bond  for  Exportation  of  Repaired  or  Re-Manu- 
factured     136 

J. 

Joint  Control    85,  90,  157-159 

Necessity  of    157-158 

Registers 158 

When  Needed   157 

Judicial  Bonds   83-95 

Classification  of   84-93 

1.  Bonds  of  Administrators,   Executors,  Assignees,  Re- 
ceivers, "  Short  Term  "  Trusts 84-89 

Joint   Control    in 85 

252 


INDEX 

Judicial   Bonds — continued. 

Classification  of — continued. 

Inquiries  on  Application 85-88 

Attorneys 85-86 

Bank  in  which  Deposits  are  Kept,  etc 86 

Investment  of  Cash 86 

Indebtedness  of  Principal  to  Estate 86 

Property  Owned  by  Principal 86-87 

Date  of  Deceased's  Death 87 

Names,   etc.,   of  Next  of  Kin 87 

Description  of  Assets 87 

Inquiries  to  Receiver  or  Assignee 87-88 

Indemnity  Agreement 88-89 

2.  Bonds   of   Guardian,    Trustees,    Conservators,    Com- 

mittees,   "Long    Term"    Trusts 89-92 

Joint  Control    in 90 

Inquiries   on   Application 90-91 

Has   Bond   Been  Given   Before 90-91 

Names   of  Attorneys 90-91 

Indebtedness  of  Applicant  to  Estate 90-91 

Names  of  Wards,  etc 90-91 

Description  of  Estate 91 

With  whom  Wards  Live 91 

How  Invested 91 

Financial  Worth  of  Principal 91 

Indemnity  Agreement 92 

3.  Bonds  Filed  in  Court  Proceedings 92-93 

4.  Bail   Bonds    93 

5.  Libel    Bonds    93 

Bond  Forms    93 

Cancellation   or  Release 93-95 

Release  of  "  Short  Term  "  and  "  Long  Term  "  Trusts  94-95 

a.  Completion   of   Trust 94 

b.  Improper  Administration  of  Trust 94-95 

Release  of  Bonds  Filed  in  Court  Proceedings 95 

Release   of   Bail   and  Libel   Bonds 95 

Renewal  on  Second  and  Subsequent  Years  Premiums 95 

Justice,  Department  of : 

Bonds   for   Employees   of 119 

Bonds  for  Officials  Located  in  Washington 119 

L. 
Labor  and  Commerce,   Department   of : 

Bonds  for  Employees  of 124 

Labor  Difficulties   60 

253 


INDEX 

PAGE 

Labor  Unions   (see  Fidelity  Risks,  Classification  of) 29-30 

Land  Office  (Interior  Dept.),  Bonds  of  Registers  of 122-123 

Larceny : 

Form  of  Individual  Fidelity  Bond  Covering 187-189 

Form  of  General  Schedule  Bond  Covering 189-192 

Last  Payment,  Time  of,  Contract  Constructural   Bonds 59-60 

Laws,   Customs  and  Internal  Revenue 125 

Layers,  Drain,   Bond  of 142-143 

Leaseholders,   Distillers  Bond 126 

Legislature  : 

Legislative  Recognition  of  Suretyship 5-6 

New  York  Recognizing   Suretyship 5-6 

Letter  Carriers,  Bonds  for 121 

Liability,    Internal   Revenue    and    Customs    Bonds    Given   U.    S. 

Govt 126 

Liability,  Supply  Bonds 70 

Libel   Bonds    93 

Release  of 95 

Licenses,  Municipal  or  Excise  Bonds  Given  in  Compliance  with 

Local  Laws 140-147 

Indemnity  Obligations 140 

Comparison  with  Fidelity  and  Contract  Obligations.  . .    140-141 

Risk 141 

Statutory   in    Form 141 

Classification  of  Bonds 141-147 

1.  Pawn  Brokers    141-142 

2.  Employment  Agents   142 

3.  Auctioneers 142 

4.  Nurserymen 142 

5.  Plumbers.  .  .    142 

6.  Drain   Layers    142-143 

7.  Moving  Buildings    143 

8.  Warehouse  Bonds 142 

9.  Explosives 143 

10.  Electricians . 144 

11.  Street   Obstructions    144 

12.  Draymen 144 

13.  Sign  License    144 

14.  Hoisting 144 

15.  Ticket  Broker   145 

16.  Opening   Streets    145 

17.  Stationary  Engineers   145 

18.  Boiler 145 

19.  Theatre 145-146 

20.  Scale 146 

254 


INDEX 

Licenses — continued.  PAGE 

Classification  of  Bonds — continued. 

21.  Basement   Stairway    146 

22.  Guaranteeing  Franchise  to  Public  Bodies 146 

23.  Bill    Board    146 

24.  Excise 146-147 

License,    Sign    Board 144 

Liens,  Bonds  Issued  Against 78-79 

Life  Insurance  Companies  : 

Bonds  of  Indemnity  for 99 

Lighting 60 

Lightermen  and  Draymen  (Customs  House),  Bonds  for 137 

Lighting    Streets    75-76 

Limitation  of  Action  in  Contract  Constructural  Bonds 62 

Cancellation  of  Bond  by 65 

Limiting  Surety's  Liability,  Contract  Constructural  Bonds ....    58-59 

Liquor,  Fermented,   Bond  for  Export  of 130 

Loan  Associations  (see  Fidelity  Risks,  Classification  of) 30-31 

Long  Term  Trusts 89-92 

Application  Form  for: 

Judicial  Cases 213-217 

Release  of 94-95 

Loss,    Proportionate    and    Counter- Security    in    Contract    Con- 
structural   Bonds    61-62 

Lost,  Bond  Covering  Instrument 96-99 

Lost    Instruments,    Form   of : 

Application   for    218-220 

Bond  Given  for 102 

Bond  Covering   98 

M. 

Maintenance  Bonds    67-69 

Definition 67 

When   Required    67-68 

Maintaining  Building   Against   Defect  During  Maintenance 

Period 67 

Concrete    Construction    67 

Installation  of  Machinery  and  Heating  Plants 68 

Guarantee  of  Street  Paving 68 

Tile  Work,  Roofing,  Small  Sewers,  Drains,  etc 68 

Necessity   for   Investigation 68-69 

Contractors'  Previous  Experience 68 

Dangers  in  Execution  Without  Collateral 68-69 

Maintenance,  Not  Guaranteed  by  Contract  Constructural  Bonds.      61 

Maintenance    Provisions    in    Contract    Constructural    Bonds 67 

Managers   (see  Fidelity  Risks,   Classification  of) 18 

255 


INDEX 

PAGE 

Manufacturer  of  Adulterated   Butter,    Bond   for 132 

Of  Filled  Cheese,  Bond  for 131 

Of  Renovated  Butter,  Bond  for 132 

Of  Smoking  Opium,  Bond  for 130 

Manufacturers'  Bond 132-133 

Manufacturers'    Bond,    Transfer 132 

Manufacturers : 

Cigar,  Bond  for 127-128 

Tobacco,    Bond    for 127 

Oleomargarine,   Bond  for 129 

Manufactured  Articles : 

Bond  for  Export  of,  with  Benefit  of   Drawback 137 

Manufactured  Tobacco,  Bond  for  Transportation  and  Export  of.  .    133 
Marine  Corps,  Navy  Department: 

Bonds  for  Assistant  Quartermaster 122 

Bond  for  Paymasters 122 

Marshals,    Consular  Courts,  U.   S. : 

Bonds    for     116 

Department  of  Justice,  Bonds  for 119 

Deputy,  Department  of  Justice,  Bonds  for 119 

Materials    ( Supply    Bonds) 70 

Mercantile  and  Manufacturing  Risks  ( see  Fidelity  Risks,  Classi- 
fication of)    17-22 

Mint  Officers,   Bonds  for 117 

Miscellaneous    Bonds : 

Application  Form  for 225-226 

Miscellaneous  Contract  Bonds 72-80 

Classification  of   72-80 

Public  Printing    72-73 

Street    Sprinkling    73 

Cotton  Compress    73 

Steam  Pumps   73 

Construction  of  Vessels 73-74 

Surveying 74 

Patents 74 

Guaranteeing   Franchise  to  Public   Bodies 75 

Street  Lighting 75-76 

Furnishing  School  Books 76 

Removal  of  Garbage 76 

Guaranteeing  Warehouse  Receipts 76-77 

Guaranteeing  Freight  Bills 77 

Guaranteeing  Payment  of  Rent 77-78 

Replacing  Property  After  Alteration 78 

Against  Liens    78-79 

Star  Route    79-80 

256 


INDEX 

Miscellaneous   Fidelity    Cases : 

Application  Form  for 185-187 

Miscellaneous   Indemnity   Bonds 96-102 

Kinds  of   96-101 

1.  Lost  Instruments    96-99 

Premium 97 

Affidavit  Necessary 97 

What   it   Should   Contain 97 

Further  Investigation    97-98 

Examples  of  Risks 98 

Hazard  on)  Risks 99 

2.  Life  Insurance   Companies 99 

Fraternal  Orders   99 

3.  Titles  to  Real  and  Personal  Property 100 

4.  Guaranteeing   Production   of   Certain   Articles    at   a 

Given  Time 100 

5.  In  Connection  with  Judicial  Cases 101-102 

a.  Money  Advanced  by  Executor  or  Administrator  101 

b.  Bonds   Protecting   Purchaser  of   Real   Property 

of  an  Estate  from  Claims  Filed  in  the  Estate.  .    101 

Bond  Forms    102 

Miscellaneous  Mercantile  Risks   (see  Fidelity  Risks,  Classifica- 
tion of)    32-33 

Mob 60 

Money : 

Officials  Handling    104 

Officials  Not  Handling 104 

Public,  Interior  Dept.  Bonds  of  Receivers  of 122-123 

Monthly  Warehousing  Bond,   Distillers 128 

Moral  Standard,  Fidelity   Risk 10-13 

Investigation 10-13 

Record  from  Former  Employers 11 

Conducted  from  Home  Office 10-11 

Applicants  Divided  into  Three  Groups 11-12 

Married  Men 12-13 

Persons    Supported  by  Applicant 13 

Relation  of  Resources  to  Demand 13 

Moving   Buildings,   Bond  for 143 

Municipality 82 

Municipal  or  Excise  Licenses,   Bonds  Given  for,  in  Compliance 

with  Local  Laws  (see  Licenses,  Municipal  or  Excise,  etc.)   140-147 
Municipal  Officials,  Bonds  on  Behalf  of  (see  Official  Bonds).    103-113 

N. 

Naval  Officers  of  Customs,  Bonds  for 117 

Navy  Department,  Employees  of,  Bonds  for 121-122 

257 


INDEX 

PAGE 

Navy  Department,   Employees  of,  Bonds  for 121-122 

Negligence,    Culpable,    Discussion    of    Fidelity    Bond    Covering 

same 39-40 

Night  Bond    ( Customs  Bond) 133 

Notice,   Provision  for,  Contract  Constructural  Bonds 56-57 

Nurserymen,    Bonds  for 142 

O. 

Obstructions,  Street,  Bonds  for 144 

Office  Organization,  Agents  (see  Agents  Office  Organization)    165-167 

Officers :    (see   Fidelity   Risks,    Classification   of) 18 

Assay 117 

Disbursing,  Dept.  of  Justice,  Bonds  for 119 

Mint,    Bonds    for 117 

Naval,  of  Customs,  Bonds  for 117 

Special  Disbursing,  U.  S.  Treasury  Dept.,  Bonds  for 117 

Officials : 

County  and  State,  Bonds,  Application  for 220-222 

Department  of  Justice,  Located  in  Washington,  Bonds  for.    119 
U.  S.   Govt.  Bonds  for  (see  U.   S.  Govt.  Officials  and  Em- 
ployees Bonds)    114-124 

U.   S.   Govt.  Bonds,  Application  for 222 

Official  Bonds   (Municipal,   etc.) 103-113 

Classification 104-108 

1.  Officials  Not  Handling  Money 104 

2.  Officials   Handling   Money 104 

Bonds  from  Employees  Should  be  Required 104-108 

Who    is    Responsible 104-105 

Hazardous    Risks     106-108 

Tax  Collectors,  County  Treasurers,  Sheriffs  and  Those 

who   "  Ex-Officio  "   Collect  Taxes 106 

Sheriffs,  Constables,  etc 106-107 

Holdovers   in  Office 107-108 

Term  of  an  Official  Bond 108 

Different  from  Fidelity  Bonds 108-109 

Application   and   Information   Desired 109-112 

Indemnity  Agreement 112-113 

Premium 112 

Bond  Forms    113 

Oleomargarine : 

Bond   for    Exporters    of 129 

Manufacturers  Bond    129 

Opening   Streets,    Bond   for 145 

Opium,   Smoking,  Bond  for  Manufacture  of 130 

Option  to  Complete,  Contract  Constructural  Bonds 57-58 

258 


INDEX 

PAGE 

Organization    of   Territory 167 

Outside  Employees   (see  Fidelity  Risks,   Classification  of)...    19-22 

P. 

Packages : 

Delivered  to  an  Importer  and  Not  Designated   for  Exam- 
ination,   Bond   for 134 

Unexamined,   Bond   for   Six  Months   for  Delivery  of 134 

Unexamined,  Bond  for  Delivery  of 134-135 

Parties,    Chiefs   of,    in    the   Coast   and   Geodetic    Survey    (Dept. 

of  Commerce  and   Labor),  Bonds  for 124 

Passed  Assistant  Paymasters,  Navy  Dept.,  Bonds  for 122 

Patents 74 

Paving  Contracts    49,  82 

Pawn   Brokers   Bond 141-142 

Pay  Directors,   Navy  Dept.,  Bonds  for 122 

Pay  Inspectors,   Navy   Dept.,   Bonds  for 122 

Pay  Masters,  Navy  Dept.,  Assistant,  Bonds  for 122 

Navy   Dept.,    Bonds   for 122 

War   Dept,   Bonds   for 118 

Navy  Dept.,   Marine  Corps,   Bonds   for 122 

Paymaster  General,  War  Dept. : 

Assistant,  Bond  for 118 

Navy  Dept.,  Past  Assistant,  Bonds  for 122 

Payment,    Deferred    and   Prompt : 

Form  of  Depository  Bonds 228-230 

Payment,  Last  Time  of  Contract  Constructural  Bonds 59-60 

Pecuniary  Risks,   in  Underwriting 7 

Peddler,    Tobacco,   Bond 128 

Pension   Agents,    Interior  Dept.,   Bonds   for 123 

Personal  Property,  Title  to,  Bond  of  Indemnity  for 100 

Physical  Standard,  Fidelity  Risks 13-14 

What  Concerned  With 13 

Plumbers'  Bond   142 

Policy  of  Insurance  Lost,   Bond   Covering 99 

Post  Office  Clerks,   Bonds  for 120-121 

Post  Office  Dept.,  Bonds  for  Employees  of 120-121 

Post  Office  Inspectors,  Bonds  for 121 

Postal  Clerks,   Railroad,  Bonds  for 121 

Postal  Department,  U.  S.  ( Star  Route) 79 

Postmasters,   Bonds    for 120 

Re-Indemnifying  Bonds  for 120 

Power  of  Attorney  ( Judicial) 83 

Power  Companies  ( see  Fidelity  Risks,  Classification  of) 28 

Preface 3-4 

259 


IXDEX 

PAGE 

Premium,   Bonds  Covering  Lost  Instruments 97 

Collection    of    166-167 

Rate,    Contract  Constructural  Bonds 54 

Official  Bonds   112 

Principal,   Bonds   Guaranteeing  Honesty  of,   etc 7 

Bond   Required  of 7 

Printing  Presses    67 

Private  Bankers   (see  Fidelity  Risks,  Classification  of) 26-27 

Production   of  Articles,   Bonds  Guaranteeing 100 

Products,  American,  Bond  to  Produce  Certificate  of  Exportation 

of 135 

Proficiency,   Not  Guaranteed  by  Contract  Constructural   Bonds.      61 

Promissory  Notes,   Lost,   Bonds  for 99 

Prompt    Payment,    Class    of    Bonds    Guaranteeing    Solvency    of 

Depositories 149-153 

Prompt  Payment,  Depository  Bonds,   Form  of 228 

Promptness    in    Correspondence 166 

Property  Responsibility,   Form  of  Bond  Covering 41 

Property,  Replacing  After  Alteration,   Bonds  for 78 

Proposal   Bonds    (see  Bid  or  Proposal   Bonds) 81-82 

Proportionate  Loss  and  Counter-Security  in  Contract  Construc- 
tural   Bonds    61-62 

Public  Bodies,  Bonds  for  Guaranteeing  Franchises  to 75,  146 

Public  Buildings,  Superintendent  of  Construction  of,  Bonds  for 

(U.    S.    Treasury    Dept.) 117 

Public  Enemy    60 

Public  Money  (Interior  Dept.),  Bonds  for  Receivers  of 122-123 

Public  Official   Obligations,   Inquiries   Concerning 164 

Public  Printing    72-73 

Pumps,   Steam    73 

Purchaser  of  Real  Property  from   an  Estate,   Bonds  Protecting 
against  Claims   101 

Q. 

Quartermaster,   Assistant : 

(Navy   Dept.),  Marine  Corps,   Bonds  for 122 

R. 

Railroads   (see  Fidelity  Risks,  Classification  of) 27-28,  49 

Railroad  Iron,  Bond  for  Repaired  or  Re-Manufactured 136 

Railroad   Postal   Clerks,   Bonds   for 121 

Rate  Premium,  Contract  Constructural  Bonds 54 

Ratio  in  Execution,  Contract  Constructural  Bonds 54-55 

Real  Property,  Title  to,  Bond  of  Indemnity  for 100 

Receipts,    Lost   Warehouse,    Bond    for 99 

Receipts,  Warehouse,  Bond  Guaranteeing 76-77 


INDEX 

PAGE 

Receivers,   Bonds   of 84-89 

Inquiries  on  Application  to,  in  Bonds 87 

Of  Public  Money  (Dept.  of  Interior),  Bonds  for 122-123 

Recognizance   Bonds    93 

Re-Delivery  of  Articles   Imported,   Bond  for 136 

Registers  of  the  Land  Office  (Dept.  of  Interior),  Bonds  for.    122-123 
Regular    Lines    (Issuance),    (see   Fidelity   Risks,    Classification 

of) 22-23 

Regulations,  Customs  and  Internal  Revenue 125 

Re-Indemnifying    Bonds   for   Postmasters 120 

Release  of  Attachment,  Replevin,  Injunction  and  Appeal  Bonds.      95 

Of  Bail   and   Libel    Bonds 95 

Of  Bonds  Filed   in    Court  Proceedings 95 

Or  Cancellation   in   Contract   Constructural   Bonds 64-66 

Judicial  Bonds   93-95 

Short  and  Long  Term  Trusts 94-95 

Re-Manufactured  or  Repaired  Railroad  Iron,   Bond  for  Expor- 
tation   of    136 

Removal    of    Garbage 76 

Renewals,    Judicial   Bonds 95 

Renovated  Butter,  Bond  for  Manufacture  of 132 

Rent,  Bonds  Guaranteeing  Payment  of 77-78 

Repaired  or  Re-Manufactured  Railroad   Iron,   Bond  for  Expor- 
tation of   136 

Replacing  Property   After  Alteration,   Bonds   for 78 

Replevin  Bond    92 

Release  of    95 

Reserve,  Time  of,   Contract  Constructural   Bonds 59-60 

Revenue : 

Internal,  Collectors,  Bonds  for 117 

Internal,    Customs    Bonds    for   U.    S.    Govt.    (see    Internal 

Revenue  and  Customs,  Bonds  for  U.  S.  Govt.) 125-139 

Internal,  Deputy  Collectors,  Bonds  for 118 

Service,  Internal    114 

Riot 60 

Risks : 

Analysis  of 7 

Credit  or  Banking  Basis  in  Underwriting 7 

Fidelity,  Classification  of 16-33 

Fidelity,   Standards  Applied  to 10-14 

Good    or    Bad,    Contract    Constructural    Bonds,    Considera- 
tion  of   Same 48-53 

Hazardous,  in  Official  Bonds 106-108 

Straight   Insurance   Basis   on   Underwriting 7 

Supply   Bonds    70 

261 


INDEX 

PAGE 

Rivers 49 

Roads 49 

Roofing 68 

Route,  Star,  Bonds 79-80 

Route,    Star,   Contractors,   Bonds   for 121 

S. 

Salesmen  (see  Fidelity  Risks,  Classification  of) 19-20 

Salt  for  Curing  Fish,   Bond  on  Withdrawal  of 136 

Scales,  Public,  Bond  for 146 

Schedule  Bond,  General,  Form  of 189-192 

Fidelity,   Bank    197-199 

Form 33 

School   Books,    Furnishing 76 

Scientific  Purposes,  Bond  for  Alcohol  Withdrawn   Free  of  Tax, 

When  Used  for 131-132 

Screen  Wagon  Service  (P.  O.  Dept.) 80 

Secretaries,  Beneficial  Orders,  Application  Forms  for 182-185 

Security,   Counter,    and   Proportionate  Loss,   Contract   Construc- 

tural   Bonds    61-62 

Seized    Goods,    Bond   of   Claimant   of,    for   Court   Costs    (U.    S. 

Customs) 135 

Settlement    of    Claim,     in    Cancelling    Contract    Constructural 

Bonds 65-66 

Sewers 49,  68 

Sheriffs,   Bonds   for 106-107 

Short  Term  Trusts 84-89 

Application  Form  for 213-217 

Release  of 94-95 

Shipping   Commissioners,  U.   S. : 

Dept.  of  Commerce  and  Labor,  Bonds  for 124 

Sign   License   Bond    144 

Skating  Rinks   (see  Fidelity  Risks,   Classification  of) 32 

Smoking  Opium,   Manufacturing  Bond  for 130 

Societies,  Beneficial,  Application  Forms  for 182-185 

Soliciting,  Art  of 167-169 

Solvency  of   Depositories : 

Bonds   Guaranteeing    148-154 

Special  Agents,  Interior  Dept.,   Bonds  for 123 

Special  Disbursing  Agents,  Dept.  of  Commerce  and  Labor,  Bonds 
for 124 

Interior  Dept,   Geological   Survey,   Bonds  for 123 

Special   Disbursing  Officers,  U.   S. : 

Treasury  Department,  Bonds  for 117 

Specific   Performance    Bond 62-64 

262 


INDEX 

Specimen  Forms    176-232 

Spirits,   Distilled,   Bond   for  Exportation   of 137 

Domestic,   Bond  for  Exportation  of 136 

Stairway,   Basement,   Bond  for 146 

Standards  Applied  to  Fidelity   Risks 10-14 

Star  Route   Bonds 79-80 

Star  Route  Contractors   Bonds 121 

State  Governments,   Contract  Constructural   Bonds   to 56 

State  Official's   Bond,   Application   Used  for 220-222 

State  Officials,  Bonds  on  Behalf  of 103-113 

State  Department : 

Employees'  Bonds    116 

State  Government,   Supply  Bonds   for 70 

State  Insurance  Departments : 

Division   of   Corporate   Suretyship    by 7-8 

Stationery 82 

Stationary  Engineers  Bond 145 

Steam  Pumps   73 

Stock   Brokers   (see  Fidelity  Risks,   Classification  of) 26-27 

Stocks    Lost,    Bond   for 99 

Stolen    Instrument,    Bond    Covering 98 

Storage  of  Imported  Teas,  Bond  for 137 

Storekeepers,    Gangers,    Bonds    for 118 

Street  Railways  (see  Fidelity  Risks,  Classification  of) 27-28 

Streets 49 

Bond  for  Opening 145 

Street  Lighting    75-76 

Street  Obstructions,  Bond  for 144 

Street  Sprinkling? 73 

Strikes 60 

Subsistence,  Commissaries  and  Assistant  Commissaries  of,  War 

Dept.,   Bonds  for 118-119 

Subways 49 

Suggestions    in   Regard    to   Business    of    Internal    Revenue    and 

Customs  Bonds  (U.  S.  Govt.) 139 

Summer   Resort   Parks 32 

Superintendent    of    Construction    of    Public    Buildings,    U.     S. 

Treasury  Department,   Bonds  for 117 

Supplies 70 

Withdrawal  of,  Bond  for  Vessel  Clearing  Coastwise 137 

Supply  Bonds    70-71 

Definition 70 

Risk 70 

Investigation 70 

Liability 70 

263 


Supply  Bonds — continued.  PAGE 

Guarantee  Under 70 

By   Whom   Required 70-71 

Form  of  Bond 71 

Surety  Bond 7 

Underlying  Principle   in   Writing 7 

What   is    8 

Suretyship 5-7 

Historical    Review    of 5-7 

Different  from   Other  Insurance 6-7 

Surety's  Liability,  Limiting,  Contract  Constructural   Bonds .  .    58-59 

Surrender   of    Obligation    in    Cancelling    Contract   Constructural 
Bonds 65 

Survey,  Coast  and  Geodetic,  Bonds  for  Chiefs  of  Parties,  Dept. 
of  Commerce  and  Labor 124 

Surveying 74 

Surveyors   of   Customs,    Bonds   for 117 

Surveyors,  General : 

Interior  Department,   Bonds  for 123 

T. 

Tax  Collectors,  Bonds  for 106 

Tax,  Withdrawal  of  Alcohol  for  Scientific  Purposes,  Free  From, 

Bond  for 131-132 

Taxes,    Bond   for   Those   who    "  ex-offlcio  "   collect 106 

Tea,  Impure  and  Unwholesome,  Bond  for  Exportation  of .  .  .    137-138 
Teas : 

Imported,   Bond  for  Examination  of 137 

Imported,    Bond   for   Storage   of 137 

Telegraph  and  Telephone  Companies  (see  Fidelity  Risks,  Classi- 
fication of)    28 

Temporary    Disbursing    Agents    (Dept.    of   Agriculture),    Bonds 

for. 123-124 

Term  of  an  Official  Bond   (State,  County,  etc.) 108 

Territory,   Organization  of 167 

Theatres   ( see   Amusment  Enterprises) 32 

Bond  for 145-146 

Ticket   Brokers,   Bond   for 145 

Tile    Work    (Maintenance) 68 

Titles,  Real  and  Personal  Property : 

Bond    of   Indemnity   for 100 

Tobacco : 

Manufacturer's    Bond    127 

Manufacturer's    Bond,    Application    for 223-224 

Manufactured,  Bond  for  Transportation  and  Export  of.  ...    133 

Peddler  Bond 128 

264 


INDEX 

PAGE 

Tornadoes 60 

Transfer,    Manufacturer's    Bond 132 

Transportation  : 

Bond  for  Fruit  Brandy 129 

Bond,  U.  S.  Custom  House 136 

Companies  (see  Fidelity  Risks,  Classification  of) 27-28 

And   Export  of  Manufacturers'   Tobacco,    Bond  for 133 

Immediate,    of    Dutiable    Merchandise,    Bond    of    Common 

Carrier  for   138 

From    Warehouse    to    General    Bonded    Warehouse,    Bond 

for 130-131 

Traveling  Salesmen  (see  Fidelity  Risks,  Classification  of) 19-20 

Treasurers : 

Assistant  (U.  S.  Treasury  Department),  Bond  for 117 

Beneficial  Orders,   Application  Forms  for 182-185 

County,  Bonds  for 106 

Treasury  Department,   Bonds  for  Employees  of 116-118 

Triplicate  Invoice,  Wanting,  Bond  in  such  a  Contingency.  .  133-134 
Trusts,  "  Short  and  Long  Term,"  Application  Form  for.  .  .  .  213-217 
Trust  Institutions  (see  Fidelity  Risks,  Classification  of)...  24-26 

Trustees 89-92 

Tunnels 49 

U. 

Underwriting  Risks 7 

Straight  Insurance  Basis 7 

Credit  or  Banking  Basis 7 

Bonds   Guaranteeing  Honesty,    etc 7 

Average  Basis  of  Underwriting  as  Applied  to  Suretyship.  .        7 
Unexamined  Packages  : 

Bond  for  Delivery  of , 134-135 

Bond   for  Six  Months   for  Delivery  of 134 

Unwholesome  and  Impure  Tea,  Bond  for  Exportation  of,  ...    137-138 

U.  S.  Commerce  Court  Clerks,  Bonds  for 119 

U.  S.  Consul  Generals,  Bonds  for 116 

U.  S.  Circuit  Court  Clerks,  Bonds  for 119 

U.  S.  Deputy  Marshals  (Dept.  of  Justice),  Bonds  for 119 

U.  S.  District  Court  Clerks,  Bonds  for 119 

U.  S.  Government,  Bond  Forms  Provided  by 138 

U.  S.  Government  Internal  Revenue  and  Customs  Bonds  (see 
Internal  Revenue  and  Customs  Bonds  for  U.  S.  Govern- 
ment)    125-138 

U.  S.  Government  Officials'  Bonds : 

Application  Form    222 

265 


INDEX 

PAGE 

U.   S.   Government  Officials  and  Employees'   Bond 114-124 

What   it   Covers 114 

Premium 114 

Investigation  and  Bond   Forms 115-116 

Employees   Furnishing    Bonds 116-124 

1.  Employees   of  State   Department 116 

U.  S.  Consul  Generals 116 

Vice   and   Deputy   Consuls 116 

U.  S.  Marshals  (Consular  Courts) 116 

2.  Employees    of    Treasury    Department - 116-118 

Assistant    Treasurers     117 

Mint   Officers    117 

Assay    Officers     117 

Supt.  of  Construction  of  Public   Buildings 117 

Collectors   of  Customs    (Special   Disbursing   Officers)..  117 

Surveyors   of    Customs 117 

Naval    Officers    of    Customs 117 

General  Appraisers   (Customs) 117 

Internal    Revenue    Collectors 117 

Disbursing  Agent 117 

Deputy   Collectors   of   Internal   Revenue 118 

Storekeepers-Gaugers 118 

3.  Employees  of  the  War  Department 118-119 

Assistant  Paymaster   General 118 

Deputy  Paymaster  General 118 

Paymasters 118 

Commissaries      and      Asst.      Commissaries      of      Sub- 
sistence     118-119 

4.  Employees  of  the  Dept.  of  Justice 119 

Disbursing    Officers    119 

Circuit  Court  of  Appeals,   Clerks 119 

U.  S.  District  and  Circuit  Court  Clerks 119 

U.  S.  Commerce    Court   Clerks 119 

U.  S.  Marshals 119 

U.  S.  Deputy   Marshals 119 

Other  Officials  Located  in  Washington 119 

5.  Employees  of  the  Post   Office  Department 120-121 

Postmasters 120 

Re-Indemnifying    Bonds    for 120 

Post   Office   Clerks 120-121 

Post  Office  Inspectors 121 

Railroad  Postal  Clerks 121 

Star  Route   Contractors 121 

Letter   Carriers    121 

266 


INDEX 

PAGE 
U.   S.   Government  Officials  and   Employees'   Bond — continued. 

6.  Employees  of  the  Navy  Department 121-122 

Assistant  Paymasters    122 

Passed    Assistant   Paymasters 122 

Paymasters 122 

Pay  Inspectors   122 

Pay   Directors    122 

Assistant   Quartermasters    (Marine    Dept.) 122 

Paymasters    (Marine  Corps) 122 

7.  Employees  of  the   Department  of   the   Interior 122-123 

Receivers  of  Public   Money 122-123 

Registers   of   the    Land    Office 123 

Special  Agents   123 

Indian  Agents    123 

Surveyors  General   123 

Pension   Agents    123 

Special   Disbursing  Agents   (Geological   Survey) 123 

8.  Employees  of  the  Department  of  Agriculture 123-124 

Temporary  Disbursing  Agents 123-124 

9.  Employees  of  the  Department  of  Commerce  and  Labor.  .    124 

Special    Disbursing    Agents 124 

Chiefs  of  Parties  in  the  Coast  and  Geodetic  Survey..    124 

U.    S.    Shipping    Commissioners 124 

U.  S.  Internal    Revenue,     Distillers    and    Warehousing    Bonds, 

Application    for    224-225 

U.  S.  Internal     Revenue,     Tobacco    and    Cigar    Manufacturers' 

Bond,  Application  for 223-224 

U.  S.  Marshal   (Dept.   of  Justice),   Bonds   for 119 

U.  S.  Marshals    (Consular    Courts),    Bonds    for 116 

U.  S.  Postal   Department   (Star   Route) 79 

U.  S.  Shipping  Commissioners  (Dept.  of  Commerce  and  Labor), 
Bonds  for    124 

V. 

Ventilating  Buildings    49 


Clearing  Coastwise,   Bond  for  Withdrawal  of  Supplies  for.    137 

Construction   of    73-74 

Libel  Bonds  for 93 

Proceedings  with  Cargo  Destined  for  Foreign  Port,  Bond  for  133 

Verified   Invoice,    Bond   to    Produce 134 

Vice  Consuls,    Bonds   for 116 

W. 

Wagon,    Screen,    Service    (Post   Office) 80 

Wardens,   Game,   Bonds  for 106 

267 


INDEX 

PAGE 

War  Department,  Bonds  for  Employees  of 118-119 

Warehouse  : 

Bonds 143 

Lost  Receipts,  Bond  for 99 

Receipts,  Bonds  Guaranteeing 77 

Transportation  from,   to  General   Bonded   Warehouse,   Bond 

for 130-131 

Warehousing : 

Annual   Distillers    131 

Bond  for  Fruit   Brandy 129 

Bond,  U.  S.  Custom  House 131 

Bonds,   U.   S.  Internal  Revenue,  Application  for 223-224 

Monthly  Bonds  for  Distillers 128 

Warehousemen,  Bond  for 42 

Water  Companies   (see  Fidelity  Risks,   Classification  of) 28 

Water  Works    49 

Wearing    Qualities   not   Guaranteed 61 

Winemakers  Bond    129-130 

Withdrawal : 

Of    Alcohol    Free    of    Tax,    for    Scientific    Purposes,    Bond 

for 131-132 

Of  Supplies  for  a  Vessel  Clearing  Coastwise,   Bond   for.  .  .    137 

Works  of   Art,    Bond   for   Exhibition   of 136 

Writing,    Release   in,    Contract    Constructural    Bonds 65 


268 


14  DAY  USE 


RETURN  TO  DESK  FROM  WHICH  BORROWED 

LOAN  DEPT. 

This  book  is  due  on  the  last  date  stamped  below,  or 

on  the  date  to  which  renewed. 
Renewed  books  are  subject  to  immediate  recall. 


•aWiiip 

NOV  1M959 

4May'61  MA 

•o  Lp 

R&C'D 

l^fi1 

&PRfcb  "* 

General  Library 
LD  21A-50m-4,'59                                 University  of  California 
(A1724slO)476B                                               Berkeley 

YB 


00  i 


A 


